MMDR Act 2026: A boon or a bane?

Shortly after the MMDR Amendment Bill 2026 was officially gazetted into law, Opposition parties in Odisha fiercely protested the Act, alleging it would cause massive financial losses to the State and demanding its immediate withdrawal. Meanwhile, citizens are left wondering what the uproar is about, looking for a clear explanation of how these changes actually affect them.

The Mines and Minerals (Development and Regulation) (MMDR) Act of 1957 was enacted to regulate and drive the development of India’s mining sector. To address evolving economic needs, the Act has been amended 16 times as of 2026. A landmark amendment in 2015 revolutionised the industry by replacing the non-transparent, discretionary “first-come, first-served” system with a competitive auction-based allotment regime. Despite initial criticism and protests, the auction system proved highly successful, increasing State mining revenues fivefold. Odisha emerged as a primary beneficiary, with its annual mining revenue skyrocketing from Rs 5,000 crore to Rs 50,000 crore.

Prior to the introduction of competitive mine auctions, the absence of mining premiums, District Mineral Foundation (DMF) contributions, and National Mineral Exploration Trust (NMET) levies left viable fiscal room for additional State-level taxation. Capitalising on this, the State government enacted the Odisha Rural Infrastructure and Socio-Economic Development (ORISED) Act, introducing a 20 per cent tax on the annual value of mineral-bearing land.

Although the Act came into effect on February 1, 2005, the Orissa High Court struck it down on December 5, 2005, ruling that the State lacked the legislative competence to impose such an additional tax.

The Odisha government appealed the decision to the Supreme Court in 2006, where it remained pending for nearly two decades. The legal landscape shifted dramatically in July 2024 when a Supreme Court bench, in Mineral Area Development Authority (MADA) vs Steel Authority of India Ltd.

(SAIL), upheld the States’ constitutional power to tax mineral rights. Consequently, the apex court permitted States to collect these tax arrears retrospectively with effect from April 1, 2005.

Following the July 2024 Supreme Court judgment, States like Jharkhand, Karnataka, and Tamil Nadu imposed additional mining taxes. However, the existing auction system had already driven premiums above 120 per cent of the average sales price, leaving virtually no room for further taxation. To curb this excessive burden and eliminate instability, uncertainty, and fragmentation across the mining ecosystem, the Union government introduced the MMDR Amendment Act 2026.

Notably, Section 9D of the amended Act permits State-level taxation but strictly subjects it to statutory limitations.

The sustainability and advisability of Odisha’s ORISED tax are increasingly questionable following the introduction of the mining auction system.

Since auctions now command premiums ranging from 100 per cent to 120 per cent, the 20 per cent ORISED tax has become economically unsustainable, effectively duplicating revenue already collected through these premiums. Currently, the ORISED tax and other mining charges generate approximately Rs 16,000 crore annually—a figure three times lower than the total mining revenue, including auction premiums. Furthermore, with only 35 of the 79 auctioned blocks currently operational, the annual premium revenue is projected to more than double once the remaining 44 mines begin production. However, realising this revenue growth depends heavily on maintaining a competitive mining ecosystem that is free from excessive taxation.

In hindsight, the State should have introduced competitive bidding for mining allotments immediately after the High Court struck down the ORISED Act in 2005.

Demanding the repeal of the MMDR Act (2026) to revive the ORISED tax is akin to flogging a dead horse. Imposing excessive and overlapping taxes ultimately burdens the public by inflating the cost of essential commodities like steel, aluminum, cement, power, and construction materials.

Ultimately, the public is the best judge of whether the MMDR Act (2026)

is a boon or a bane.

ABOUT THE AUTHOR

Tapan Chand

Tapan Chand