Kerala CM says MMDR amendments could erode states' fiscal autonomy

V D Satheesan said proposed restrictions on taxes and levies on mineral rights and mineral-bearing lands could weaken states' constitutional and fiscal autonomy

Kerala Chief Minister V D Satheesan has urged Prime Minister Narendra Modi to reconsider provisions of the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, arguing that the legislation has “far-reaching implications” for the constitutional and fiscal powers of states, particularly their authority to levy taxes and other imposts on mineral rights and mineral-bearing lands.

 

In a letter to the Prime Minister dated August 15, Satheesan said the amendments “substantially alter” the constitutional position on mineral taxation and raised concerns over their impact on the federal distribution of legislative and fiscal powers between the Centre and states.

 

This comes after Jharkhand Chief Minister Hemant Soren wrote to Prime Minister Modi last week seeking reconsideration of the Bill, which now awaits the assent of the President of India to become an Act.

   

The Kerala Chief Minister referred to the Supreme Court’s 2024 judgment in Mineral Area Development Authority versus Steel Authority of India, stating that the nine-judge Constitution Bench had held that royalty payable under the MMDR Act was not a tax and affirmed the legislative competence of states to tax mineral rights under Entry 50 of List II.

 

He also pointed out that the court recognised the competence of states under Entry 49 of List II to levy tax on mineral-bearing lands, including on the basis of mineral yield or value.

 

“The judgment thus reaffirmed an important sphere of fiscal autonomy constitutionally available to the States,” Satheesan said in the letter.

 

The Chief Minister said the proposed Section 9D of the MMDR amendments restricts the ability of state governments to impose any tax, cess or other levy on mineral rights and mineral-bearing lands except within parameters prescribed by the central government.

 

He argued that the amendments also seek to bring mineral-bearing lands within the ambit of central regulation and invalidate certain past state levies that remain uncollected or unpaid.

 

“These provisions raise serious concerns regarding the federal distribution of legislative and fiscal powers under the Constitution,” Satheesan said.

 

While acknowledging that Entry 50 of List II allows Parliament to impose limitations on states’ power to tax mineral rights through a law relating to mineral development, he said the proposed amendments “appear to go substantially beyond prescribing reasonable limitations”.

 

The Kerala Chief Minister said the provisions could make the exercise of states’ constitutional taxation powers dependent upon parameters determined by the Union government.

 

He also raised concerns over the extension of such restrictions to the taxation of mineral-bearing lands, arguing that the state’s legislative competence to tax lands and buildings flows independently from Entry 49 of List II.

 

The amendments could have implications for Kerala’s mineral-bearing areas, Satheesan said, pointing to the mineral-rich coastal belt around Chavara in Kollam district, which contains deposits of ilmenite, rutile, zircon, sillimanite, garnet and monazite.

 

“Restricting the State’s fiscal authority over mineral-bearing lands could adversely affect State revenues and may also have consequences for levies and revenues accruing at the local-government level,” he said.

 

The Chief Minister also raised concerns over the provision relating to past dues under the Bill. He said the Supreme Court, while dealing with the consequences of its judgment in the Mineral Area Development Authority case, had permitted states to recover eligible past dues from April 1, 2005, subject to the conditions and phased-payment arrangement stipulated by the court.

 

“Legislative invalidation of accrued but unrealised State revenues arising in this context would have significant financial consequences for mineral-bearing States,” Satheesan said.

 

Satheesan, however, said Kerala recognised the need for a nationally coherent policy for sustainable mineral development, prevention of excessive or arbitrary levies, and creation of a predictable investment environment.

 

“These objectives, however, can and should be pursued through consultation and consensus with the States without substantially impairing their constitutionally assigned fiscal powers,” he said.