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The debate surrounding the Mines and Minerals (Development and Regulation) Amendment Act, 2026, or MMDR, has largely been framed as a contest between economic efficiency and fiscal autonomy of states. The Union government argues that India’s mining sector is burdened by an increasingly fragmented system of state levies that raises costs, discourages investment and undermines the competitiveness of Indian minerals at a time when the country is seeking to become a major manufacturing and critical-minerals power.

Critics, including the Biju Janta Dal (BJP), which governed Odisha for 24 years under former chief minister Naveen Patnaik, and other mineral-producing states have argued that greater control of the Union over mineral levies weakens the fiscal autonomy of states.

By contrast, the Bharatiya Janata Party (BJP)-led Union government and state governments (including the current Mohan Charan Majhi government in Odisha), present the amendment Act as a measure that will expand rather than curtail the role of states in mining. Both sides have a legitimate argument. The amendment does not take away Odisha’s existing core mining revenues, including royalties, auction premia, DMF (a fund for affected local communities from mining firms) receipts and other statutory income.

But the amendment does restrict the state’s ability to impose new taxes, cesses or other levies on mineral rights and mineral-bearing land in the future, except within conditions prescribed by the Union government. It also extinguishes certain unpaid or unrecovered dues from past levies.

The Union government can therefore argue that revenue-sharing remains unchanged, while excessive or unpredictable state levies that deter investment in capital-intensive mining have been removed. The harder question is why eliminating one distortionary tax should require states to surrender a valuable future fiscal instrument. The amendment transfers fiscal authority immediately, while its promised benefits depend on uncertain investment, industrialisation and future revenues.

This asymmetry between certain costs and speculative gains makes the amendment problematic from a public economics perspective.

Moreover, the constitutional stakes remain significant: Justice B.V. Nagarathna’s dissent in the 2024 SAIL judgment argued that parliament’s power to impose limitations on state taxation of mineral rights under Entry 50, List II gives the MMDR framework unusually broad reach. Odisha’s own Orissa Rural Infrastructure and Socio-Economic Development (ORISED) Act, 2004 shows that this power is not abstract: the state had sought to capture mineral rents through a dedicated levy to finance rural infrastructure and socio-economic development.

Natural-resource rents, fiscal option value and Odisha’s public finances

The weakness of the current debate is that it treats mineral taxation as though it were simply another form of business taxation. Minerals generate location-specific economic rents that can often be taxed with limited efficiency costs. The real question is how those........

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