Centre to address high mining taxes in upcoming consultations with states

The SC last year permitted states to impose additional taxes on mining activities, indicating that royalty collected by states under Sec 9 of the Mines and Minerals (Dev & Reg) Act, 1957 is not a tax

The central government plans to hold consultations with state governments to address concerns about excessive taxation on mining operations, according to a report by The Economic Times. This comes in response to a recent Supreme Court ruling that permits states to impose additional taxes on mining activities, a move that has raised apprehensions within the sector.  

 

Impact of Supreme Court verdict  

The report follows the Supreme Court judgement that states have the power to levy tax on mines and minerals. The nine-judge Constitution Bench held that the ‘royalty’ collected by state governments under Section 9 of the Mines and Minerals (Development & Regulation) Act, 1957 (MMDRA) is not a tax.

   

The decision paved the way for states to impose additional taxes on mining operations within their territories. Karnataka has already taken steps in this direction by approving the Karnataka Minor Minerals Rules (2024) on December 6, projecting additional revenue of over Rs 4,700 crore from the sector.

 

Under the revised rules, the royalty on mining stone and minor minerals has been raised to Rs 80 from Rs 70 per tonne. The rules, which are reviewed every three years, also allow for differential tax rates based on the category of mines while maintaining uniform rates for leases within the same category.

 

Concerns of the mining industry

The industry fears that more states may follow Karnataka’s lead, significantly raising input costs for mining operations. Delays in operationalising mining leases and high taxation levels are already key challenges for the sector.  

 

A senior government official told The Economic Times, “Our deliberations with states will address the basic issues of high taxation affecting domestic mining. Delayed operationalising of mining leases will also be on the agenda.”  

 

Key focus areas of the consultations 

The upcoming meeting, expected in the second half of January 2025, will explore:  

• Measures to reduce turnaround times for auctioned mines.  
• Boosting exploration of critical minerals.  
• Incorporating artificial intelligence to improve mining efficiency.  

Additionally, strategies to streamline mining lease approvals and alleviate the financial burden on operators will be prioritised.  

 

Mining operations under the auction regime  

Since the introduction of the auction-based mining regime in 2015, 435 mineral blocks have been auctioned across the country. However, only 50 of these have been operationalised as of November 2024. Despite these delays, Union Mines Minister G Kishan Reddy highlighted that post-auction revenues for states have seen significant growth.  

 

The Centre’s consultations aim to balance state revenue needs with the operational viability of the mining sector, ensuring sustainable development and efficient resource utilisation.