Centre proposing parity in mineral taxation, states’ rights to remain intact: Union Mines Secretary

The proposed amendments to the Mines and Minerals (Development and Regulation) Act aim to bring greater parity in mineral taxation and production costs across states. The goal is to make mining conditions more consistent and reduce distortions that could harm industry. The Centre says states would retain their authority to collect taxes and cess.

Parity does not mean every state would receive identical revenue. It means taxes, cess and related production costs should make economic sense across neighbouring states. The Mines Secretary specifically called for a rational tax structure covering minerals. This is intended to support industrial growth and competitiveness.

The proposal responds to concerns that sharply different costs could redirect economic activity. Chandra used bauxite as an example, warning that uneven conditions could create supply problems or encourage imports despite domestic availability. The amendments are therefore presented as a way to improve efficiency without removing states’ fiscal rights.

The proposed amendments would seek to narrow major differences in mineral taxation and production costs between states. The Centre argues that sharply different conditions can distort business decisions. Industries may choose locations based mainly on tax and cost advantages rather than supply, efficiency or broader economic factors.

The key mechanism is greater parity. States would still collect taxes and cess, but the overall structure would be more rational and economically consistent. Chandra said taxes and cess should make economic sense for all minerals. This approach is meant to prevent neighbouring states from creating large cost gaps.

The expected effect is a more enabling environment for mining and manufacturing. The proposal does not promise identical costs or tax rates. Instead, it seeks to reduce harmful variation while respecting states’ rights. The Centre links this balance to stronger industrial growth and a more competitive mining sector.

According to Mines Secretary Keshav Chandra, states currently receive 92 to 93 per cent of the revenue generated from mining activities. This figure was used to emphasise that the proposed amendments would not take away the states’ financial stake or authority in mining.

The Centre, he said, does not receive any significant revenue from mining apart from the Goods and Services Tax, or GST. Chandra added that GST is also devolved to states. He further said that about three per cent of royalty-related revenue is used for exploration activities.

These figures form part of the Centre’s argument for cooperative federalism. The proposed tax changes are presented as an effort to improve consistency and competitiveness, rather than centralise mining income. States would continue to collect taxes and cess, while the Centre would seek a more rational structure across the sector.

Large differences in mineral taxes can change where companies choose to operate. If two neighbouring states have similar mineral resources but one imposes much lower taxes, businesses may prefer that state. Production costs can fall there, improving the financial appeal of mining or mineral-based manufacturing.

The mechanism is a change in relative competitiveness. Companies compare taxes, cess and other production costs when deciding where to invest or process minerals. Chandra warned that activity could shift toward states offering more favourable conditions. Such movement can weaken development in higher-cost states and create imbalances between nearby regions.

The Centre therefore wants greater parity while keeping states’ taxation rights intact. A more rational structure could reduce tax-driven relocation and support a broader industrial base. Chandra connected this approach with economic growth, mining-sector competitiveness and cooperative federalism between the Centre and states.

Uneven taxation can make domestically produced bauxite more expensive in one state than in another. Buyers and industries may then avoid the higher-cost supply, even if the country has enough bauxite overall. This can weaken the practical availability of the mineral for manufacturers.

The key mechanism is the link between taxes, production costs and supply decisions. If taxes and cess raise the cost of bauxite in a particular location, companies may shift activity to a cheaper state. If moving domestic supply is difficult or uneconomic, businesses could even turn to imported material. Chandra cited this risk directly.

The result would be a supply-related challenge caused not by a lack of mineral resources, but by uneven economic conditions. The Centre proposes greater parity to reduce this distortion. It says a rational tax structure can help domestic industry use available minerals more effectively.

Critical minerals such as lithium, nickel and rare earth elements are important inputs for manufacturing batteries and permanent magnets. The article identifies access to these minerals, together with domestic processing facilities, as crucial for producing those technologies in India.

Their importance extends beyond mining the raw materials. India also needs facilities that can process lithium, nickel and rare earth elements into usable inputs. Without enough domestic supply and processing capacity, manufacturers may depend on imports. The Centre therefore wants to build a stronger domestic chain from minerals to finished products.

The government has announced substantial subsidies for lithium and nickel processing facilities. It has also launched a ₹1,500 crore scheme to promote recycling black mass and electronic waste. Chandra expressed confidence that India could produce enough critical minerals and inputs for batteries and permanent magnets within three to four years.

In the article, cooperative federalism means balancing national economic goals with the constitutional and financial role of states. The Centre says it respects states’ rights while recognising the need for growth and competitiveness in mining. The proposed amendments are presented as cooperation, not central takeover.

States would continue to collect taxes and cess from mining. The Centre would seek greater parity in mineral taxation and production costs across states. It would also encourage a rational tax structure and an enabling economic environment. Chandra said states receive 92 to 93 per cent of mining revenue, while the Centre receives no significant revenue apart from GST.

This division leaves states with major revenue powers while giving the Centre a role in improving consistency across the sector. About three per cent of royalty-related revenue is used for exploration. The intended result is coordinated policy that supports industry without undermining state authority.