The Mines and Minerals (Development and Regulation) Act, 1957 is the statute that decides who may dig in India, on what terms, at what price and under whose permission. It is Act 67 of 1957, and it came into force on 1 June 1958. Almost every question that reaches a lawyer, a state government, a mining company or a village affected by a pit begins inside its pages: whether a concession exists at all, whether the grant was made by the right government, whether the money demanded is royalty or something else, and whether a tax imposed on top of royalty is one the Constitution permits. The Act is short beside the subjects it governs, and its brevity is deceptive, because three different legal orders meet inside it. The first is a constitutional order, which divides power over minerals between the Union and the States and which the Act rearranges by means of a single declaration. The second is an administrative order, which converts the subsoil into concessions with names, periods, areas and conditions. The third is a fiscal order, which prices extraction through royalty, dead rent and two statutory funds, and which a nine judge Bench of the Supreme Court substantially redrew in July 2024.

A reader who holds those three orders apart can answer most of what is asked about mining law in India. A reader who runs them together will repeat the errors that fill the public discussion of the subject: that concessions are still granted on application to whoever asks first, that royalty is a tax, that the Union fixes everything and the States merely administer, or that the judgment of 2024 either changed nothing or changed everything without limit. Each of those propositions is wrong, and this article takes them in turn. It begins with the constitutional device that makes the Act possible, because nothing else in the statute makes sense without it. It then sets out the definitions that divide major minerals from minor minerals, the concession architecture through which rights are granted, the money provisions, the auction reform of 2015 that replaced administrative preference with price, the amendments of 2016, 2021 and 2023, and the penalty framework for illegal mining. It closes with the fullest available account of the 2024 judgment and of the order that followed it, because that judgment is the reason the Act is read differently from the way it was read for thirty four years.

The constitutional device: a State subject taken up by declaration

Minerals begin, in the Constitution, as a State subject. Entry 23 of the State List covers regulation of mines and mineral development, and a state legislature reading that entry alone would appear to hold the whole field. The appearance is qualified in the entry itself. Entry 23 is expressly made subject to the provisions of the Union List with respect to regulation and development under the control of the Union. Entry 54 of the Union List covers regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest. The two entries are therefore not rivals occupying the same ground. They are a lock and a key. The State holds the field by default, and Parliament may take up so much of it as it declares expedient, whereupon the State power recedes to the extent of the declaration.

Section 2 of the Act is the declaration. It states that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent provided in the Act. Those last words matter. The Union did not take the whole field. It took the field to the extent the Act provides, and the Act provides different extents for different minerals, which is why the division between the Union and the States runs through every operative provision rather than sitting in one place. Where the Act is silent, the State power under Entry 23 survives. Where the Act speaks, the Union scheme governs, and a state law that collides with it must give way under the repugnancy doctrine that the article on Article 254 and repugnancy examines in its general form. The occupied field idea, which recurs throughout the taxation dispute, is this same point in fiscal dress: the question is never whether the Union is present in mining, which it plainly is, but whether its presence extends to the particular power being exercised.

Two taxing entries complete the constitutional picture, and they must be fixed in the mind at the outset because the litigation of three decades was fought over them. Entry 49 of the State List covers taxes on lands and buildings. Entry 50 of the State List covers taxes on mineral rights, subject to any limitations imposed by Parliament by law relating to mineral development. Entry 50 is the only entry in the lists that names mineral rights as a tax base, and its closing words are the hinge of the whole dispute: the State power exists, and Parliament may limit it by a law relating to mineral development, and the argument was always about whether the Act of 1957 was such a limitation. The full map of the lists, and the way entries are read against each other, is set out in the guide to the Seventh Schedule and its three lists, to which this article returns at each point where an entry does the work.

Why does a State subject sit inside a Union statute?

Because Entry 23 of the State List is expressly subject to Entry 54 of the Union List, and Entry 54 is activated by a declaration of Parliament that Union control is expedient in the public interest. Section 2 of the Act is that declaration, and it takes the field only to the extent the Act provides, leaving State power intact wherever the Act does not speak.

The practical division that follows from the declaration is a division between rule making and granting. For minerals other than minor minerals, the Central Government makes the principal rules, including the rules that govern the grant of concessions, the rates of royalty and the procedure of auction, while the State Government grants the concession, conducts the auction, executes the lease and collects the money. That split surprises readers who assume that Union control means Union administration. It does not. The miner deals with the State at almost every step: the application or bid goes to the State, the letter of intent issues from the State, the lease deed is executed with the State, and royalty is paid to the State. The Union writes the rulebook, prescribes the royalty rates in the Second Schedule, issues directions and, since 2023, conducts auctions itself for a defined class of critical and strategic minerals. Understanding that the Centre holds the pen and the State holds the door is the single most useful orientation the subject offers, and it explains why disputes about a grant are usually disputes with a state government conducted under central rules.

There is one further structural point. Mineral oils are outside the Act altogether. Section 3 provides that minerals includes all minerals except mineral oils, and mineral oils, defined to include natural gas and petroleum, are governed by a separate statutory regime built around the Oilfields Act and the petroleum legislation. Coal and lignite are inside the Act and appear in the First Schedule, although their working is heavily overlaid by the nationalisation statutes and by a separate auction regime for coal blocks. Atomic minerals are inside the Act but reserved in a special way, appearing in Part B of the First Schedule and subject to the control that the atomic energy legislation exercises over the same substances. The Act is therefore the general law of mining, not the whole law of extraction, and a complete account of any particular mine may require three or four statutes to be read together.

The definitions that run the statute

Section 3 carries the definitions, and four of them do nearly all the work. A mining lease is a lease granted for the purpose of undertaking mining operations, and mining operations means any operations undertaken for the purpose of winning any mineral. A prospecting licence is a licence granted for the purpose of undertaking prospecting operations, and prospecting operations means operations undertaken for the purpose of exploring, locating or proving mineral deposits. A reconnaissance permit, introduced by a later amendment, authorises reconnaissance operations, meaning preliminary prospecting through regional, aerial, geophysical or geochemical surveys and geological mapping, without the pitting, trenching and drilling that belong to prospecting proper, save for boreholes on a grid the Central Government specifies. A composite licence, in the vocabulary the later amendments settled on, is a prospecting licence cum mining lease, a two stage concession granted for prospecting followed by mining operations in a single instrument.

The fifth definition is the one on which the federal division turns, and it is worth stating exactly. Section 3(e) provides that minor minerals means building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral which the Central Government may, by notification in the Official Gazette, declare to be a minor mineral. Three features of that definition deserve attention. The list in the Act itself is short and mundane, which is the point: the minerals named are the materials of ordinary construction, extracted in small workings near the place of use. The sand carve out is deliberate, because sand used for prescribed purposes, such as the manufacture of glass or certain industrial uses, is treated as a major mineral and stays inside the central scheme. And the notification power means that the boundary between major and minor is not fixed by geology. A mineral moves across the line when the Central Government notifies it, and when it moves, the entire regulatory regime that governs it changes with it, from central rules and auction discipline to state rules made under Section 15.

What is the legal difference between a major and a minor mineral?

A minor mineral is one of the building stones, gravel, ordinary clay or ordinary sand named in Section 3(e), or a mineral the Central Government has notified as minor, and it is governed by rules the State Government makes under Section 15. Every other mineral is a major mineral, governed by the Act itself and by central rules, with royalty rates fixed in the Second Schedule.

The consequence of the definition is that a very large part of everyday extraction in India is regulated entirely at state level. Sand for construction, stone for aggregate, gravel for roads, clay for bricks and the murram and earth of local works are minor minerals, and for them the State makes the rules, fixes the rates, sets the concession periods, designs the grant procedure and runs the enforcement. Two adjoining States may regulate the same river sand on wholly different terms, with different royalty rates, different lease periods, different environmental conditions imposed by rule and different penalties, and neither is in breach of the central Act, because Section 15 commits the subject to them. This is why the phrase mining law in India conceals two systems. For iron ore, bauxite, manganese, copper, gold and the other minerals of the First Schedule, there is one national architecture. For the materials that build houses and roads, there are as many architectures as there are States, held together only by the penalty provisions of the central Act and by the environmental legislation that applies to all extraction regardless of classification.

Section 3 also supplies the vocabulary of the later amendments. Notified minerals are the minerals specified in the Fourth Schedule, a category created in 2015 to carry the tighter auction and grant discipline for minerals the Centre singled out. The First Schedule is organised in parts: Part A for hydrocarbon and energy minerals, being coal and lignite; Part B for atomic minerals; Part C for the metallic and non metallic minerals that form the ordinary run of major mining; and Part D, added in 2023, for critical and strategic minerals. The Second Schedule fixes royalty rates. The Third Schedule fixes dead rent rates. Later schedules carry the additional payment obligations for captive sales and the list of minerals for which an exploration licence may be granted. A reader who knows which schedule a question belongs to usually knows which government answers it, because the schedules are where the Act stores its federal decisions.

The concession architecture: four doors into the subsoil

The Act grants rights in stages, and the staging reflects a simple fact about minerals: nobody knows what is underground until money has been spent finding out. The concession system therefore separates the right to look from the right to dig, and prices and conditions each stage separately.

The first door is the reconnaissance permit. It authorises wide area preliminary survey over a large block, on a non exclusive logic in its original design, and it confers no right to extract and sell mineral. Its product is information: geological mapping and survey data that identify where closer examination is worthwhile. The second door is the prospecting licence. It authorises the holder to enter, to pit, trench and drill, to take samples and to prove the deposit, meaning to establish its extent, grade and workability to a standard on which an investment decision can rest. The third door is the mining lease. It alone authorises mining operations, the winning of mineral for dispatch and sale, and it is granted over a defined leased area for a defined period subject to a mining plan, environmental clearance under the environmental legislation, forest clearance where forest land is involved, and the conditions of the lease deed. The fourth door is the composite licence, the prospecting licence cum mining lease, which combines the second and third stages in one grant made at the outset: the holder prospects, and on proving the deposit moves to mining under the same concession without a fresh contest for the mining right. The composite licence exists because the older sequence created a gap in which a prospector who had spent money proving a deposit could find the mining lease contested, delayed or granted on terms that ignored the prospecting investment, and the gap discouraged exploration by anyone who did not already hold mining ground.

Section 4 states the foundational prohibition: no person shall undertake any reconnaissance, prospecting or mining operations in any area except in accordance with the terms and conditions of a permit, licence or lease granted under the Act and its rules. Everything outside a concession is therefore not merely irregular but unlawful, and the penalty provisions attach to the absence of the instrument rather than to the manner of working. Section 4 also bars operations in an area that is not held under a concession, and the allied provision on transportation and storage, inserted as Section 4(1A), prohibits transporting or storing any mineral otherwise than in accordance with the Act and its rules, which is the provision that reaches the truck carrying illegally mined sand and the stockyard holding it. Section 4A empowers the State Government, after consultation and for reasons recorded, to require premature termination of a prospecting licence or mining lease in the interest of conservation of minerals, the protection of the environment or similar public grounds, subject to the compensation the provision prescribes. Termination under Section 4A is a public interest power, not a penalty, and the distinction matters when a lessee challenges it.

Section 5 restricts who may hold a concession and on what approval. A concession may be granted only to a citizen of India or to a company or body corporate as the section prescribes, and for the minerals specified in the First Schedule the State Government may not grant a reconnaissance permit, prospecting licence or mining lease without the previous approval of the Central Government. That approval requirement is the point at which the Union declaration bites hardest in daily administration: for First Schedule minerals the State holds the door, but the key turns only with central consent, and the file of a major mineral grant characteristically contains a central approval letter as its central document. Section 6 fixes maximum areas, so that no person acquires concessions over an area larger than the ceiling the section and the rules prescribe, a provision aimed at preventing the warehousing of mineral ground by a single holder. Section 7 and the rules govern the periods of reconnaissance and prospecting, which are short and renewable within limits, reflecting that exploration rights are meant to be exercised or surrendered.

How long does a mining lease run?

Since the reform of 2015, a mining lease is granted for fifty years. The long term replaced the earlier pattern of shorter grants followed by renewals, and it was paired with a rule that on expiry the lease is not renewed but the area is auctioned again, so the fifty year term is both a security for investment and a fixed horizon.

The period of the mining lease deserves its history. Under the original scheme a mining lease ran for a term between twenty and thirty years and was renewable for further periods, and renewal became the point at which administrative discretion, delay and litigation concentrated, because a lessee who had built a plant around a mine faced the loss of the mine at renewal while a State that wished to favour another applicant could use the renewal stage to do it. The reform of 2015 abolished that pattern for the future. Section 8 as substituted provides that a mining lease shall be granted for a period of fifty years, and Section 8A, which carries the transitional discipline for grants, provides that leases granted before the reform are deemed to have been granted for fifty years from their original grant or their last renewal, and that on expiry the lease shall not be renewed and the area shall be put to auction. Existing lessees received the benefit of the fifty year measure, which for many converted a lease nearing expiry into a lease with years to run, and in exchange the renewal door was closed behind them. The fifty year term is long enough to amortise a plant, a railway siding and a township, and short enough that the State recovers the asset within a planning horizon. It is one of the provisions in which the 2015 reform most plainly traded discretion for certainty.

The lease is also transferable, on conditions. As originally framed the Act restricted transfer, and transfers required state approval, which became another discretion point. The reform of 2015 made leases granted through auction transferable to an eligible person on the terms the Act and rules prescribe, with a transfer charge, because an auctioned asset that cannot be sold cannot be financed properly and cannot move to the operator best able to work it. The reform of 2021 removed the remaining restrictions on transfer of concessions not granted through auction and removed transfer charges, completing the movement from a permission based system to a market based one. Rights under a concession may also pass on death or insolvency under the rules, and the Act treats the concession throughout as a property interest held on statutory conditions rather than as a personal favour, which is the premise the Supreme Court later used when it characterised royalty as a contractual payment.

The money: royalty, dead rent and the two funds

Royalty is the price of the mineral. Section 9 provides that the holder of a mining lease shall pay royalty in respect of any mineral removed or consumed from the leased area at the rate specified in the Second Schedule, and that the Central Government may, by notification, amend the Second Schedule to enhance or reduce the rate, with the safeguard that a rate shall not be enhanced more than once in a period of three years for a mineral. Royalty is charged on the quantity removed or consumed, and for the major minerals the Second Schedule expresses it either as a percentage of the sale price on an ad valorem basis or as a sum per tonne, depending on the mineral. Iron ore, the largest case, is charged ad valorem, which ties the State’s receipts to the price the mineral commands and makes royalty the single largest fiscal flow from mining to the mineral bearing States. Royalty is payable to the State Government as owner and lessor of the mineral, a characterisation whose importance only became fully visible in 2024, and the lessee’s obligation arises from the lease read with the statute, a dual source that generated the tax argument. Section 9(3) confers the rate fixing power, and the three year safeguard is the lessee’s protection against frequent revision, a protection the States later pointed to when they argued that royalty revision was too slow and too centralised to reflect the costs they bore.

Dead rent is the price of holding ground without working it. Section 9A provides that the holder of a mining lease shall pay dead rent annually at the rates in the Third Schedule for all areas included in the lease, and that where royalty payable in a year exceeds the dead rent, the lessee pays royalty and not dead rent, so that dead rent operates as a minimum annual payment for the concession. Its function is disciplinary rather than fiscal. A lessee who holds a proved deposit idle, waiting for prices to rise or for a buyer to appear, pays for the privilege every year, and the payment rises with the period of holding under the schedule’s structure, pressing the holder either to work the mine or to surrender the lease so that the area can be granted to someone who will. Surface rent and water charges for the use of surface land sit beside these provisions in the rules, payable for the surface occupied by the workings, and compensation for surface damage is a separate matter between the lessee and the surface owner or occupier.

What is the difference between royalty and dead rent?

Royalty is charged on mineral actually removed or consumed, at the rate in the Second Schedule, and is the price paid to the State as owner of the mineral. Dead rent is an annual charge on the whole leased area at the rates in the Third Schedule, payable whether or not anything is extracted, and in any year the lessee pays the greater of royalty and dead rent, not both.

Two funds created in 2015 complete the money architecture, and they are considered in detail in the section on that reform. In outline, Section 9B requires a District Mineral Foundation in every district affected by mining related operations, funded by contributions from lessees fixed as a proportion of royalty, and Section 9C creates a National Mineral Exploration Trust funded by a contribution of two per cent of royalty, to pay for the regional and detailed exploration the sector had chronically underfunded. Both contributions are levied on top of royalty and are calculated from it, which is why the layered impost argument in the taxation debate counts royalty, foundation contribution, trust contribution and any state tax together when it describes the total burden on a tonne of mineral.

The rule making provisions allocate the pen. Section 13 empowers the Central Government to make rules for the whole field of major mineral regulation, including the grant of concessions, the terms and conditions of leases, the fixation and collection of fees, royalty and dead rent, and conservation. Section 14 confines Sections 4 to 12 in their application so that the concession code operates as the Act intends across prospecting and mining. Section 18 obliges the Central Government to take all such steps as may be necessary for the conservation and systematic development of minerals and for the protection of the environment, and it is under Section 18 that the Mineral Conservation and Development Rules, with their mining plan discipline, progressive mine closure obligations and star rating of mines, are made. Section 15, by contrast, empowers State Governments to make rules for minor minerals, including the grant of leases and permits, the fees and royalty for them, and the conditions of working. Section 23C, inserted in 2000, empowers State Governments to make rules for preventing illegal mining, transportation and storage of minerals. The location of a rule making power in the Act is therefore a reliable map of who governs the subject, and a practitioner asked who decides a mining question first asks which section authorises the rule under which the decision was taken.

Alongside the concession and money provisions sits a body of machinery that a full account must at least name. The Act provides for the reservation of areas for exploitation by government companies and corporations, so that a State may withdraw an area from private grant and reserve it for a public sector undertaking. It provides for the special position of the Geological Survey of India and the Indian Bureau of Mines, the latter being the Union agency that approves mining plans, inspects mines for conservation compliance and publishes the average sale prices from which ad valorem royalty and auction parameters are computed. It provides for the collection of statistics and for returns by lessees, on which the whole price reporting system depends. And it provides, in Section 20A, a power for the Central Government to issue directions to State Governments in the interests of mineral development, a power used among other things to direct States to align their District Mineral Foundation rules with the national welfare programme for mining affected districts. Each of these is machinery rather than principle, but machinery is where mining law is mostly lived, and the practitioner who knows only the principles will lose the case in the file notings.

The reform of 2015: auction replaces preference

For nearly six decades the Act granted concessions on application. An applicant asked for a prospecting licence or a mining lease over an area, the State considered the application against criteria of the kind administrators apply, and where several applicants sought the same ground, preference was determined administratively, guided by considerations such as the applicant’s experience, financial capacity, end use and the order and completeness of applications. The system assumed that the scarce resource was administrative judgment. Experience taught that the scarce resource was the mineral, and that a system which allocated a valuable public asset by judgment rather than by price would attract influence, litigation and scandal. The discretionary allotment of natural resources had by then been condemned in the litigation over telecommunications spectrum and coal blocks, in which the Supreme Court held that the distribution of state largesse in the form of natural resources must follow a fair and transparent method and that a first come first served allocation of scarce resources failed that standard. Mining concessions sat squarely inside that reasoning, and the coal block allocations made under a screening committee process had been cancelled as arbitrary. The reform of mining grants was therefore not a free policy choice made in calm conditions. It was a response to a constitutional discipline the courts had already announced.

The Mines and Minerals (Development and Regulation) Amendment Act, 2015, which is Act 10 of 2015 and which was preceded by an ordinance promulgated on 12 January 2015, rebuilt the law of grant around auction. Its central provisions, Sections 10B and 11, provide that mining leases and composite licences for the minerals within their scope shall be granted through auction by competitive bidding, conducted electronically, in which the bid variable is a percentage of the value of mineral despatched that the bidder undertakes to pay the State in addition to royalty and the other statutory contributions. The State notifies the block, publishes the geological information available for it, fixes the eligibility conditions and the reserve parameters, conducts the bidding and issues a letter of intent to the successful bidder, who then satisfies the conditions, obtains the clearances the law requires and executes the lease. For minerals where exploration has established the deposit, the grant is of a mining lease. For areas where the deposit is indicated but not proved to the standard a mining investment requires, the grant is of a composite licence, so that the exploration risk is taken by the bidder in exchange for the mining right that follows on proof. The system is described in the guide to infrastructure law in India as part of the wider movement from licensing to auction across the resource sectors, and the comparison is instructive because spectrum, coal and major minerals all travelled the same road within a few years of each other, for the same stated reasons and with the same institutional consequences.

Three consequences of auction deserve separate statement, because each is a change in the nature of the concession rather than in its procedure. The first is that price displaced judgment as the allocating principle, and with price came a new fiscal flow. The auction premium, the percentage of value bid above royalty, became in many blocks a sum larger than royalty itself, so that the total statutory take from a major mineral block came to comprise royalty, auction premium, foundation contribution and trust contribution, all computed from the value of the mineral despatched. The second is that the identity of the grantee changed. An applicant under the old system needed administrative confidence; a bidder under the new system needs capital, geological competence and the ability to carry exploration and clearance risk, and the regime rewards the bidder who values the block highest rather than the applicant who presents best. The third is that the State’s role changed from patron to vendor. A State that auctions a block sells a defined asset on published terms, and its discretion is confined to designing the sale, whereas a State that grants on application decides who deserves the asset, and every disappointed applicant becomes a potential litigant alleging favour. Auction litigation exists, and it is about eligibility, bid process and the terms of the notice inviting tender, but it is litigation about a sale, which is narrower and more tractable than litigation about desert.

What did the 2015 reform change about the grant of concessions?

It replaced grant on application, with preference determined administratively, by grant through auction by competitive bidding for mining leases and composite licences, extended the mining lease term to fifty years with no renewal on expiry, made auctioned leases transferable and created the District Mineral Foundation and the National Mineral Exploration Trust as statutory charges on royalty.

The transitional provisions of 2015 were as important as the new grant system, and harder. Section 10A dealt with pending applications, and it divided them by stage. Applications that had not matured into a letter of intent or an approval largely fell away, because to carry them into the new regime would have perpetuated the old one. A narrow class of applicants who had obtained the in principle approval for grant of a mining lease, or who held a prospecting licence and had established the existence of mineral resources, were protected by a right to move to the next stage within the conditions the section prescribed, because those applicants had spent money on the faith of the earlier system and the reform respected the investment while closing the door behind them. The sorting of pending files under Section 10A generated a large volume of litigation, much of it about whether a particular approval was the kind the section saved, and the reform of 2021 finally resolved the residue of those cases by providing that the pending applications saved under the earlier transitional clause would be dealt with as the 2021 amendment prescribed, with a reimbursement mechanism for expenditure in defined circumstances. The lesson the sequence teaches is general: a change in the method of allocating a public asset is easy to announce and expensive to complete, because every file opened under the old method is a claim against the new one.

The District Mineral Foundation and the exploration trust

Section 9B requires the State Government to establish, by notification, a District Mineral Foundation as a trust in every district in which mining related operations take place. The object of the Foundation, stated in the section, is to work for the interest and benefit of persons and areas affected by mining related operations, in the manner prescribed by the State Government. The Foundation is funded by contributions from lessees. The rates were fixed by the rules notified in September 2015 at thirty per cent of the royalty paid for mining leases granted before 12 January 2015 and ten per cent of the royalty paid for mining leases granted on or after that date. The asymmetry is deliberate and is the financial expression of the transitional bargain: a lessee who obtained a lease without auction and without an auction premium contributes a third of royalty to the district, while a lessee who paid a market price at auction contributes a tenth, because the auction premium already transfers part of the mineral’s value to the public. Holders of prospecting and composite licences contribute at the rates the rules prescribe for those instruments. The Central Government’s programme for the use of Foundation funds, the Pradhan Mantri Khanij Kshetra Kalyan Yojana, issued under directions under Section 20A, directs the Foundations to spend the major share of their funds on high priority subjects in the affected areas, namely drinking water supply, environment preservation and pollution control, health care, education, welfare of women and children, welfare of the aged and disabled, skill development and sanitation, with the balance available for physical infrastructure, irrigation, energy and watershed development.

The Foundation is the Act’s answer to a question the older statute never asked: who bears the cost of mining where it happens. A mine takes land, water, roads and air quality from a district, and under the classical scheme the district received employment and the statutory payments went to the state exchequer, from which they might return to the district or might not. The Foundation intercepts a defined share of the mineral’s value at source and confines it to the affected district and to the affected persons, administered by a governing structure that includes district officials and public representatives. Whether the Foundations have spent well is a separate and contested question, on which auditors and researchers have reported accumulation of unspent balances, expenditure on general district works with a weak connection to mining affected persons, and in some districts a disciplined programme of water and health investment. What the statute did, and what no reading of it should miss, is to convert an argument about compensation into an institution with a revenue line. Mining affected communities appear in the Act not as objectors at a hearing but as beneficiaries of a trust, and that is a change in their legal position even where the money moves slowly.

Section 9C creates the National Mineral Exploration Trust, established by the Central Government, with the object of funding regional and detailed exploration in the country. Every holder of a mining lease or a composite licence pays to the Trust a sum equivalent to two per cent of the royalty paid. The diagnosis behind the Trust was that India explored too little of its own geology, that exploration is a public good in its early stages because the information outlives the explorer, and that private capital would not fund regional exploration whose product is data rather than a mine. The Trust therefore collects a small levy on production and spends it on the surveys, drilling and studies that create the inventory of blocks the auction system needs. The two funds together express the fiscal philosophy of the 2015 settlement: royalty prices the mineral, the Foundation compensates the district, and the Trust replenishes the stock of knowledge from which future grants are made. A reader who is asked what a lessee pays should therefore never answer with royalty alone.

The amendments of 2016, 2021 and 2023

The amendment of 2016, Act 25 of 2016, was principally a clarifying and enabling measure. It addressed the definition of leased area, facilitated the transfer of concessions in the case of a lessee’s death or resolution, and dealt with the position of concessions held in areas that had become part of newly formed States, so that the reorganisation of a State did not unsettle the titles within it. It belongs to the class of amendments that repair the machinery rather than alter the policy, and it is a reminder that a working statute accumulates such repairs continuously.

The amendment of 2021, Act 16 of 2021, which came into force on 28 March 2021, made four changes of substance. It removed the distinction between captive and merchant mines. Under the older scheme a block could be reserved for a specified end use and granted as a captive mine to feed a linked plant, and the mineral could not be sold in the open market. The 2021 amendment provided that no mine shall be reserved for a particular end use in future auctions, and it permitted existing captive lessees to sell up to fifty per cent of the minerals produced in a year, after meeting the requirements of the linked end use plant, on payment of an additional amount prescribed in the Sixth Schedule. The reasoning was that a captive holder whose plant needed less than the mine could produce left mineral in the ground or produced below capacity, and that the economy lost the mineral while the holder lost the revenue. The amendment also provided for the transfer of statutory clearances: where a lease expires or is terminated and the area is auctioned, the valid rights, approvals, clearances and licences of the former lessee continue and vest in the successful bidder, so that a mine does not stand idle for years while a new operator repeats clearances the site has already earned. It removed the restrictions on transfer of mineral concessions and the transfer charge. It resolved the residue of the pending application cases under the transitional provisions of 2015. And it opened exploration to accredited private agencies, which may undertake exploration without a prospecting licence on notification and may receive funding from the exploration Trust, on the reasoning that the public exploration agencies alone could not generate blocks at the rate the auction system consumed them. It also empowered the Central Government, where a State failed to complete an auction within a period specified after consultation, to conduct the auction itself, an early instance of the Centre stepping from rule maker into the grant process.

What did the 2023 amendment do for critical minerals?

It created an exploration licence for deep seated and critical minerals, inserted Part D into the First Schedule listing twenty four critical and strategic minerals, omitted six minerals from the atomic minerals list in Part B so that private bidders could take concessions in them, and empowered the Central Government under Section 11D to auction mining leases and composite licences for the Part D minerals itself.

The amendment of 2023, Act 34 of 2023, which came into force on 17 August 2023, is the most consequential change since 2015 and it is directed at a supply problem rather than a governance problem. The minerals on which energy transition and electronics technologies depend, including lithium, cobalt, nickel, graphite, the rare earth elements and the platinum group, are minerals in which India has limited proved reserves, limited production and heavy import dependence, and in which the older statute presented two obstacles. The first was that several of them sat in Part B of the First Schedule as atomic minerals, a classification made because they occur in association with the atomic minerals programme, and concessions in atomic minerals were reserved to government companies, so private capital could not take them at all. The second was that deep seated minerals are expensive and uncertain to explore, and the concession ladder offered no instrument calibrated to that risk. The amendment addressed both. It omitted six minerals from Part B, namely lithium, beryllium, niobium, titanium, tantalum and zirconium bearing minerals, and placed them where private bidders could compete for them. It inserted Part D in the First Schedule listing twenty four critical and strategic minerals. It inserted Section 11D, empowering the Central Government to conduct the auction of mining leases and composite licences for the Part D minerals, with the revenue from the auction flowing to the State in which the block lies, a division under which the Centre conducts the sale and the State receives the price. And it created an exploration licence, granted through auction for the twenty nine minerals listed in the Seventh Schedule, under which the licensee explores a large area for deep seated and critical minerals and shares in the value of the auction premium if the exploration leads to a mining lease, converting exploration from a cost centre into a speculative asset with a defined payoff. The royalty rates for lithium, niobium and rare earth elements were specified by a subsequent amendment of the Second Schedule, because an auction cannot be held for a mineral whose royalty is unstated.

Taken together, the amendments of 2021 and 2023 show the statute being used for industrial policy. The Act of 1957 was a control statute. The Act after 2015 is an allocation statute. The Act after 2023 is also a supply security statute, in which the identity of the mineral determines the identity of the auctioneer and the availability of the concession. That layering is why a pillar account of the Act must be read in three periods, and why a provision cited without its amendment year is usually being cited wrongly.

Illegal mining: the penalty framework and its limits

Section 21 carries the offences. A person who contravenes Section 4(1), by undertaking reconnaissance, prospecting or mining operations without a concession, or Section 4(1A), by transporting or storing mineral unlawfully, is punishable with imprisonment for a term which may extend to five years and with a fine which may extend to five lakh rupees per hectare of the area, and for a continuing contravention an additional daily fine for every day during which the contravention continues after conviction. Other contraventions of the Act and its rules carry the lesser penalties the section prescribes, and Section 21(5) provides a remedy of a different character: where a person raises mineral without lawful authority, the State Government may recover the mineral raised, or where it has been disposed of, the price of the mineral, together with rent, royalty and tax for the period of the unauthorised occupation. That recovery provision is the workhorse of illegal mining enforcement against large operators, because it converts a criminal question into a money demand measured by the value of what was taken, and it was the provision under which the enormous demands in the litigation described below were raised. Section 22 bars cognizance: no court shall take cognizance of an offence under the Act except upon a complaint in writing made by a person authorised by the Central or the State Government, which confines prosecution to official initiative and is a recurring point in private complaints about illegal extraction. Section 30B provides for Special Courts for the speedy trial of offences, and the rules under Section 23C allow States to constitute check posts, require transit passes and provide for the seizure of vehicles and mineral.

The litigation on illegal mining is the third body of case law in this field, beside the allotment cases and the taxation cases, and its centre is the report of the Central Empowered Committee and the commissions of inquiry that documented extraction in Karnataka, Goa and Odisha. In Samaj Parivartana Samudaya v State of Karnataka, decided in 2013, the Supreme Court acted on findings that leases in the Bellary region had been worked in violation of their boundaries, their clearances and their approved quantities, cancelled leases in the most serious category of violation, capped annual production and directed a regime of monitoring, on the footing that the statutory scheme and the environmental clearances together defined the lawful measure of extraction and that production beyond that measure was unlawful. In Common Cause v Union of India, decided in 2017 in respect of Odisha, the Court held that mining carried on without an environmental clearance or a forest clearance, or in excess of what those clearances permitted, was illegal mining, and directed recovery of the full value of the mineral so raised under the recovery provision, rejecting the argument that recovery should be limited to a proportion of the value. The article on environmental jurisprudence of the Supreme Court carries the wider arc of that litigation, including the Goa cases in which a cap on extraction and an intergenerational equity fund were directed. The point for the statute reader is that the Act supplies the prohibitions and the recovery power, while the content of lawful extraction in a given mine is supplied by the clearances, and illegality is established by reading the two together.

Honesty about minor minerals belongs in this section. The largest enforcement problem in Indian mining, measured by the number of workings and the number of people affected, is not iron ore but sand and stone. Sand is a minor mineral, so the rules are state rules, the leases are short, the workings are numerous and dispersed along rivers, the material is low in value per tonne and high in volume, and the margin between lawful and unlawful extraction is a matter of depth, area and season that a small enforcement staff cannot police across a district. Unauthorised sand extraction damages river banks, bridges, groundwater recharge and agricultural land, and it is sustained by construction demand in the same districts that suffer the damage. The central Act contributes the offence, the recovery power and the state rule making power under Section 23C, and the National Green Tribunal and the environmental appraisal system have added sustainable sand mining guidelines and district survey reports as preconditions, but the enforcement itself is the State’s, and the record varies from States that have moved sand to auctioned blocks with electronic transit passes and satellite surveillance to States where extraction is effectively unregulated. In Scheduled Areas the position has an additional layer, because the Panchayats (Extension to the Scheduled Areas) Act, 1996 gives the Gram Sabha a role in respect of minor mineral concessions, and the article on the PESA Act 1996 sets out that consultation and ownership framework, which must be read with the state minor mineral rules before any grant in such an area is treated as complete.

Who grants, who taxes, who benefits

Element	Who determines it	Who receives the money	Provision or authority
Rules for major minerals	The Central Government	Not applicable	Section 13 of the Act
Rules for minor minerals	The State Government	Not applicable	Section 15 of the Act
Grant of the concession	The State Government, with previous central approval for First Schedule minerals	The State, as lessor	Sections 5 and 10B or 11 of the Act
The auction	The State Government, and the Central Government for Part D critical and strategic minerals	The State in which the block lies	Sections 10B, 11 and 11D of the Act
Royalty	The Central Government fixes the rate in the Second Schedule	The State Government, as owner of the mineral	Section 9 of the Act
Dead rent	The Central Government fixes the rates in the Third Schedule	The State Government	Section 9A of the Act
District Mineral Foundation contribution	The rate is fixed as a proportion of royalty by rule, thirty per cent for leases granted before 12 January 2015 and ten per cent for leases granted on or after that date	The District Mineral Foundation trust of the affected district	Section 9B of the Act
National Mineral Exploration Trust contribution	Fixed by the Act at two per cent of royalty	The National Mineral Exploration Trust	Section 9C of the Act
State tax on mineral rights	The State legislature, under Entry 50 of the State List	The State that enacts the tax	Entry 50 of List II, as read in the judgment of 2024
State tax on mineral bearing land	The State legislature, under Entry 49 of the State List	The State that enacts the tax	Entry 49 of List II, as read in the judgment of 2024

Read the table from the top and the settlement of 2015 appears. Read the last two rows and the settlement of 2024 appears, and the difference between the two settlements is that the first was made by Parliament and the second was made by a court correcting itself.

The taxation dispute: thirty four years of a single question

The question was short. Royalty is charged under a statute, at rates fixed by the Central Government, on mineral taken under a lease granted by a State. Is royalty a tax? If it is, then a State that levies a further tax on mineral rights is taxing a field the Union has occupied, and a cess charged on royalty is a tax on a tax, and the State lacks competence. If it is not, then the State’s taxing entries remain what they say, and royalty and tax can coexist because they are different kinds of exaction resting on different foundations. Everything in the litigation, across thirty four years and three Constitution Benches, is an elaboration of that question and of its twin: whether the Act of 1957, by fixing royalty and by containing the declaration in Section 2, imposes a limitation on the State power under Entry 50 of the kind the entry itself contemplates.

In India Cement Ltd v State of Tamil Nadu, a Bench of seven judges held in a judgment delivered in 1990 that royalty is a tax. The case concerned a cess levied by Tamil Nadu on royalty, and the Court reasoned that because royalty was a tax, and because the field of mineral development was occupied by the Union under the declaration, a State could not levy a tax on mineral rights or a cess measured by royalty. The holding had a large practical consequence that its reasoning did not advertise. Entry 50 became, in substance, a dead entry. States that owned the minerals, bore the environmental and social cost of their extraction and administered the leases could charge royalty at centrally fixed rates and nothing else, and the rates could be revised by the Centre no more than once in three years. Mineral bearing States watched the value of their subsoil income determined elsewhere, on a timetable they did not control, while the costs of extraction, in damaged roads, depleted water, displaced villages and exhausted land, arrived in their own budgets.

In State of West Bengal v Kesoram Industries Ltd, decided in 2004, a Bench of five judges examined cesses levied on coal bearing land and held them valid, and in doing so it confronted India Cement. The Bench concluded that the proposition that royalty is a tax rested on an error, that the passage in the earlier judgment should be read as holding that a cess on royalty is a tax rather than that royalty itself is a tax, and that royalty, being a payment under a lease, is not a tax. But a Bench of five cannot overrule a Bench of seven, and the Court in Kesoram said what it said while the larger Bench’s authority stood over it. The result was a period of genuine doctrinal instability, in which the smaller Bench had explained why the larger Bench was wrong and the larger Bench’s conclusion remained the law. States legislated on the strength of Kesoram, levying taxes and cesses on mineral bearing land and on mineral rights. High Courts divided. Assessees paid or resisted depending on the jurisdiction. The reference that would resolve the conflict was made in 2011, when a Bench of three judges hearing the appeal in Mineral Area Development Authority v Steel Authority of India referred the question to a Bench of nine judges, the strength needed to reconsider a decision of seven.

Why did the question need a Bench of nine judges?

Because the proposition that royalty is a tax had been laid down by a Bench of seven judges in 1990, and under the discipline of precedent a Bench may not overrule a decision of a larger Bench. A Bench of five in 2004 had said the proposition rested on an error but lacked the strength to displace it, so only a Bench of nine could settle the question.

The reference took thirteen years to be answered. During those years the fiscal position of the mineral bearing States and the contingent liabilities of every large mining house and steel maker rested on a question the Court had agreed was open. That interval is itself part of the story, because a taxing power that may or may not exist cannot be budgeted by a State or priced by an investor, and the uncertainty was a cost imposed on both sides of the argument without either side having chosen it.

The judgment of 25 July 2024

On 25 July 2024 a Bench of nine judges delivered judgment in Mineral Area Development Authority v Steel Authority of India. By a majority of eight to one, the Court held that royalty payable under the Act is not a tax. The reasoning proceeded in steps, and each step is worth separating because the consequences differ.

The first step was characterisation. Royalty, the majority held, is a contractual consideration paid by the lessee to the lessor for the enjoyment of mineral rights under the mining lease. The liability arises out of the conditions of the lease, notwithstanding that the rate is imposed and regulated by statute. A tax, by contrast, is a compulsory exaction by a sovereign authority for public purposes, imposed without a direct quid pro quo. Royalty fails that description because the lessee pays it in exchange for the mineral it takes from land the State owns; it is the price of the thing extracted, not a contribution exacted from the citizen. The fact that statute fixes the rate and provides machinery for recovery does not convert a price into a tax, because the statute is regulating a bargain between owner and lessee, not levying on a subject. Dead rent was characterised the same way, as a contractual payment for holding the lease, which matters because dead rent had been swept into some of the cesses in issue.

The second step was the reading of the entries. Entry 54 of the Union List is a regulatory entry, not a taxing entry, and it confers no power on Parliament to tax mineral rights. The power to tax mineral rights is conferred by Entry 50 of the State List on the state legislatures, and Parliament cannot reach the same subject through its residuary power, because a subject expressly assigned to the State List is not available to the residuary entry. Entry 49 of the State List, taxes on lands and buildings, was held to include mineral bearing land within the word lands, so a State may tax mineral bearing land as land, measured by reference to the mineral it bears, independently of Entry 50. Between the two State entries, the Court held that where a tax is in pith and substance a tax on mineral rights it falls under Entry 50, and Entry 49 covers the tax on the land itself, so the two entries have distinct fields and the specific entry for mineral rights takes precedence for that subject.

The third step was the limitation question, and it was the step on which the Act itself was construed. Entry 50 allows Parliament to impose limitations on the State taxing power by a law relating to mineral development. The Union’s argument was that the Act is such a law and that its scheme, including the fixation of royalty, limits the power. The majority held that the Act does not impose such a limitation. Nothing in the Act prohibits a State from taxing mineral rights. The fixation of royalty is not a limitation on taxation, because royalty is not a tax and a provision fixing a price does not speak to a taxing power at all. The declaration in Section 2 takes the regulation and development of minerals under Union control to the extent the Act provides, and the Act provides for regulation and development, not for the exclusion of State taxation. The occupied field argument therefore failed at the point where it had succeeded in 1990: the field occupied was the field of regulation, and taxation of mineral rights was never inside it.

The conclusion followed. India Cement was overruled to the extent it held that royalty is a tax. The position in Kesoram was affirmed. State legislatures are competent to levy taxes on mineral rights under Entry 50 and on mineral bearing lands under Entry 49, and the MMDR Act does not limit that competence.

Justice B. V. Nagarathna dissented. In her view royalty is in the nature of a tax, the decision in India Cement was correctly decided, and the States have no legislative competence to impose a tax on mineral rights because the field is governed by the Union law. The dissent also warned against the consequences for uniformity: minerals are a national input, their prices feed into steel, cement, power and construction across every State, and a regime in which each mineral bearing State sets its own additional levy on the same activity invites divergence, unhealthy competition between States and a burden that travels far beyond the State that imposes it. The majority did not deny that divergence was possible. It held that divergence is a consequence the constitutional text contemplates, because the text assigns the power to the States and qualifies it only by a parliamentary limitation that Parliament has not enacted. That exchange, between a textual allocation and a consequential objection, is the real argument in the case, and it is why the judgment is a federalism judgment and not merely a mining judgment.

The order of 14 August 2024: the Court writes the transition

A judgment that royalty is not a tax, delivered in 2024 about a proposition laid down in 1990, raised an immediate question the merits judgment had not answered: from when does the restored competence operate, and what happens to demands for past years. States had legislated, cesses had been levied and struck down or stayed, assessees had paid under protest or not paid at all, and if the restored power operated across the whole period, liabilities stretching back decades would crystallise at once against mining companies, steel makers and public sector undertakings, including the Union’s own. The Union and industry sought prospective overruling, the doctrine under which a court that changes the law declares that the new position governs only the future, so that transactions closed under the old position are undisturbed.

By an order of 14 August 2024 the Court declined to give the judgment prospective effect only, and gave reasons: prospective overruling in this setting would undermine legislative enactments already in place in the States, would reward those who had not paid over those who had, and would leave the constitutional position declared but practically empty for the period in which the States had in fact legislated. Instead, the Court laid down conditions. States may levy or renew demands of tax under Entries 49 and 50 in terms of the judgment, but a demand shall not operate on transactions prior to 1 April 2005. The levy of interest and penalty on demands made for the period before 25 July 2024 shall stand waived for all assessees. And the time for payment of the demands shall be staggered in instalments over a period of twelve years commencing on 1 April 2026.

The date of 1 April 2005 was not arbitrary. It is the point from which the position taken in Kesoram in 2004 could be said to have put States and assessees on notice that the taxing power was asserted and judicially supported, so that demands reaching back before it would reach into a period governed, without visible qualification, by India Cement. The package as a whole is recognisably a transitional provision of the kind a legislature enacts when it changes a tax regime: a commencement date chosen to balance reliance against restitution, a waiver of interest and penalty for the period of legal uncertainty, and a spreading of the payment obligation over a period long enough to be absorbed. The Court said plainly that it was fashioning conditions because of the consequences that would emanate from the past period, and it did the fashioning itself rather than leaving the demands to be raised and then litigated mine by mine.

This article takes no side on whether a court should design such a regime, and the question deserves to be stated fairly in both directions. In favour of the course the Court took, the alternative was not legislative design but no design at all. Parliament had not enacted a transition, the States had enacted taxes at different times in different forms, and a bare declaration of competence would have produced a decade of litigation over limitation, interest and penalty in which the outcomes would have depended on the accident of which demand was raised when. A court that overrules a thirty four year old fiscal precedent knows that the reliance interests are enormous and symmetric, and the doctrine of prospective overruling exists precisely because courts accept responsibility for the temporal consequences of changing the law; the conditions of August 2024 are that responsibility exercised in a more granular form, and the difference between them and prospective overruling is largely one of form, since both devices protect settled expectations while allowing the new rule to operate. Against the course the Court took, the choice of a cut off date, the waiver of interest and the length of an instalment period are judgments about revenue, cash flow and distributive fairness that legislatures make after committee scrutiny and fiscal estimation, and a court has neither the data nor the democratic warrant for them. Fixing 1 April 2005 rather than another date, and twelve years rather than five or twenty, determines who bears a very large cost, and the determinations are not derivable from the constitutional text whose interpretation was the Court’s task. Both statements are true, and the tension between them is not resolved by noticing that the outcome was convenient. The series has traced Parliament displacing judicial constructions by legislation in field after field. Here the direction is reversed, and the institutional question is the same question seen from the other side: who writes the rule that governs the change of rules.

The two cases on the outcome, stated at full strength

The States’ case begins with cost. A mineral bearing State supplies the land, the water and the roads, loses the land permanently or for generations, absorbs the dust, the blasting, the truck traffic, the drawdown of aquifers, the in migration and the eventual closure, and hosts the population whose health and livelihood the extraction disturbs. Against those costs it received, before 2024, royalty at a rate fixed by the Central Government, revisable at intervals of not less than three years and in practice revised at longer intervals after committee processes in which the State was a consultee rather than a decision maker. Royalty rates for several minerals went unrevised across periods in which the price of the mineral multiplied. A State that cannot tax mineral rights has no fiscal instrument that responds to the cost it bears, and must fund the roads, hospitals and water systems of its mining districts from general revenues raised largely elsewhere. The constitutional argument matches the fiscal one. Entry 50 is in the State List. It names taxes on mineral rights in terms. A reading of the Act that extinguishes it without any provision in the Act saying so is a reading that deletes an entry by implication, and the Court in 2024 restored the entry to the meaning its words carry. Supporters add that the fear of layered taxation is overstated, because a State that taxes its own mineral sector into uncompetitiveness taxes its own royalty base with it, and the discipline of inter state competition operates on legislatures as it operates on firms.

The industry case begins with arithmetic. A tonne of iron ore leaving a mine already carries royalty, an auction premium that in competitive blocks has exceeded royalty itself, a District Mineral Foundation contribution of ten or thirty per cent of royalty, an exploration trust contribution of two per cent of royalty, and the goods and services tax and other imposts that attend any industrial operation. A state tax on mineral rights adds another layer to the same activity, assessed on the same base, by a third government instrument, and it does so at rates that will differ between States producing the same mineral for the same national market. A steel plant buying ore from two States will face two fiscal regimes for an identical input, and a mine in a State that levies heavily competes against a mine in a State that does not, which is a distortion created by geography rather than by efficiency. The retrospective element sharpens the objection. Even cut off at 2005, waived of interest and spread over twelve years, the demand is a liability for years in which the governing precedent of the Supreme Court said the tax could not be levied, incurred by companies that priced their product, paid their dividends and closed their accounts on that footing. To call the liability unbudgeted is not rhetoric. It is a description of accounts signed in reliance on a judgment of the highest court. Industry also makes the national argument the dissent made: minerals are not a local product, they are the feedstock of infrastructure in every State including those with no minerals at all, and a fiscal regime for them designed State by State exports the cost of one State’s revenue decision to consumers in all the others.

A verdict is available on one part of this and not on the whole. On the question of law the majority is right, and the reason is textual rather than sympathetic: a tax is an exaction without quid pro quo, royalty is paid for the mineral taken, and a judgment that called the price of a commodity a tax in order to disable a State entry was always vulnerable to the correction it received. On the question of fiscal design, which is the question both sides are really arguing about, the judgment settles nothing, because it was not asked to. It restores a power. Whether the power is exercised heavily, lightly, uniformly by agreement among States, or limited by Parliament under the very words of Entry 50, are questions that belong to legislatures, which is where the Constitution put them and where they were always going to end up once the entry was read as written.

What the judgment did not decide, and what follows for practice

Precision about the limits of a large judgment is worth as much as an account of its holdings. The judgment did not fix any rate of tax, approve any particular state levy, or hold that every cess or tax a State has enacted on mineral bearing land is valid. Each state enactment must still be tested on its own terms: whether it is in pith and substance a tax on mineral rights or on land, whether it is in truth a tax at all rather than a fee or a colourable levy on a subject outside the State’s competence, whether it offends the equality guarantee by the classifications it makes, and whether it is a tax on mineral rights that Parliament has limited by a law relating to mineral development. The judgment did not hold that royalty can be charged twice or that a State may levy under Entry 50 a charge that is royalty under another name. It did not disturb the auction regime, the royalty rates in the Second Schedule or the contributions to the two funds, all of which continue as statutory obligations independent of the taxing power. And it did not decide the separate and continuing questions about the levy of goods and services tax on royalty and on the grant of mining rights, which arise under a different constitutional scheme and remain the subject of their own litigation.

For the mining company and its adviser, the practical consequences are that the concession route and the tax exposure must be modelled separately and State by State. The route to a concession is the auction, and its terms are national. The exposure after the concession is granted is increasingly local, and a bid priced on royalty and premium alone is a bid priced on an incomplete account of the statutory take in that State. For the state government reader, the consequence is an opportunity with a drafting burden attached: a tax on mineral rights must be enacted with its base, its measure and its relationship to royalty stated with care, because the litigation that follows will be about the character of the levy and not about competence, and competence was the only question 2024 answered. For the aspirant and the researcher, the consequence is that the field’s standard examination propositions have inverted. Royalty is not a tax. Entry 54 is regulatory. Entry 50 is alive. India Cement is overruled. Kesoram states the law. And a proposition about the temporal reach of the judgment is incomplete unless it carries the cut off date, the waiver and the twelve year staggering with it.

Reading the Act as a whole

The MMDR Act repays being read as an argument rather than as a code. Its argument is that the subsoil is a public asset held by the States, that its development is a national concern which the Union may take up by declaration, that the right to extract it must be earned in stages as knowledge grows, that the price of extraction belongs to the owner and is fixed nationally so that the same mineral bears the same royalty in every State, that part of that price must be intercepted for the district that bears the extraction and part for the exploration that replaces what is taken, and that the whole arrangement is enforced by offences, recovery and the discipline of clearances. The amendments of 2015, 2021 and 2023 each moved one term of that argument: 2015 changed how the right is earned, from judgment to price; 2021 changed how freely the right can be used and transferred; 2023 changed who conducts the sale when the mineral is strategic. The judgment of 2024 moved a term the Act did not contain, by restoring to the States a fiscal power the Act had been misread as taking away, and then, in the order of August 2024, the Court supplied the transition that a legislature would ordinarily have supplied. What remains constant across all of it is the division the Act began with, between the government that writes the rules and the government that owns the ground, and a reader who keeps that division in view will find that the statute, for all its amendments and its litigation, is describing one settlement from several directions. This article is a guide to the law as enacted and interpreted; it is general information on a statute, and a person acting on a particular concession, demand or levy should take advice on the facts of that case.

Where the Act came from: the 1948 settlement and its replacement

The Act of 1957 was not the first central mining statute. Its predecessor was the Mines and Minerals (Regulation and Development) Act, 1948, enacted under the Government of India Act framework and continued after the Constitution, which asserted central control over mining in a more tentative form and left much of the practical regulation to the provinces and then the States. The decade after Independence exposed the limits of that arrangement. Industrial policy treated minerals as the foundation of planned development, steel capacity depended on iron ore and coal whose allocation was fragmented, and the States administered concessions under divergent practices while the Union carried responsibility for industrial outcomes it did not control. The Constitution had anticipated the tension and built the declaration device into Entry 54 for exactly this situation. Parliament used it comprehensively in 1957, repealing the 1948 Act and substituting a single statute that coupled the declaration with a complete concession code, a royalty schedule and a rule making allocation. The Industrial Policy Resolution of 1956, which reserved the commanding heights of industry to the public sector, formed the political background: minerals were to be developed under public direction, and the statute was the legal instrument of that direction.

Two features of the original settlement explain provisions that otherwise look eccentric. The first is the reservation of areas for government companies. In a period when the public sector was expected to conduct mining directly, a mechanism that withdrew areas from private grant and held them for state undertakings was central rather than exceptional, and although the economy around it changed, the mechanism survived, was used for coal and for several major minerals, and still shapes the map of available blocks in some States. The second is the previous approval requirement for First Schedule minerals. In the original design it was the everyday instrument of central direction, the point at which the Union satisfied itself that a State’s proposed grant served the national plan. Auction has changed what the approval examines, since price is discovered by bidding rather than assessed by an official, but the requirement persists as the formal trace of the planning era inside an allocation system that planning would not have recognised.

The Act then passed through long periods of relative quiet punctuated by structural amendment. The amendment of 1972 strengthened the termination and penalty provisions. The amendments of the 1980s and 1990s adjusted royalty machinery, inserted the recovery and cognizance provisions in their modern form and, in 1994 and 1999, revised the delegation between the Centre and the States, transferring additional minerals and functions to state administration and inserting the reconnaissance permit as exploration practice changed. The amendment of 1999 also made the change in the Act’s short title, reversing the order of its two gerunds so that development precedes regulation in the name, a cosmetic alteration that legislative draftsmen of the period made across several statutes and that explains why older reports cite the Act in the reverse order. The amendment of 2000 inserted Section 23C and the state power to make rules against illegal mining, transportation and storage, as the scale of unauthorised extraction became impossible to treat as a series of individual offences. None of these amendments changed the basis of grant. That waited until 2015, which is why the history of the Act is best told as a long first period in which the machinery was repaired while the allocating principle stood still, followed by a decade in which the principle itself was replaced and then extended.

The auction in practice: from notification to lease deed

The statutory provisions on auction are short, and the procedure lives in the Mineral (Auction) Rules made under the Act. A State that wishes to grant a block begins with geology: the block must be explored to the level the rules require for the instrument proposed, which for a mining lease means a higher level of proved resources than for a composite licence. The State prepares the block, obtains the reports, fixes the area and issues a notice inviting tender with the geological report, the eligibility criteria, the estimated quantity and value of resources, the reserve price parameters and the timetable. Bidding is electronic and two staged. Bidders first submit technical bids with an initial price offer, and those who qualify and whose offers clear the threshold proceed to a final electronic auction in which they raise the percentage of the value of mineral despatched that they will pay. The highest bidder is declared the preferred bidder, pays the first instalment of the upfront amount computed from the value of estimated resources, and receives a letter of intent. The letter of intent is not the lease. It is a promise conditioned on the bidder doing the things only a grantee in waiting can do: preparing and obtaining approval of a mining plan, obtaining environmental clearance after public hearing, obtaining forest clearance where the block includes forest land, and satisfying the other conditions the notice prescribes within the time allowed. On satisfaction, the bidder pays the remaining upfront amount and the performance security, and the lease deed is executed and registered for the fifty year term. Failure at any stage forfeits the bid security and the amounts the rules prescribe, and the block returns to the State for a further round, a sequence that has occurred often enough that annulment and re auction of blocks is a standard chapter in the sector’s reporting.

Three features of this procedure repay attention. The first is that the bid variable is a share of value rather than a sum per tonne, so the State’s return rises and falls with the mineral’s price, aligning the seller’s interest with the market instead of fixing a price that inflation or a price boom would erode. The second is that the upfront amount and performance security are computed from the estimated value of resources, which disciplines speculative bidding: a bidder who inflates the percentage to win the block must find real money at the outset calculated on the same estimate. The third is that the clearances remain outside the auction. The State sells the mineral right, but the environmental and forest regimes decide whether and how the right may be exercised, and a preferred bidder who cannot obtain clearance loses the block. That separation is frequently criticised as a risk that deters bidding and strands capital, and the amendment of 2021 addressed the mirror image of the problem at the end of a lease by transferring the outgoing lessee’s clearances to the incoming bidder, but at the beginning of a lease the risk remains with the bidder, and the price bids in contested blocks are understood in the industry to include a discount for it.

For composite licences the sequence differs in the middle. The licensee first explores under an approved programme, reports the results, and on establishing a deposit to the prescribed standard applies for the mining lease over the area the licence entitles it to retain, which is smaller than the prospecting area, the balance reverting to the State. The exploration licence introduced in 2023 differs again: it is aimed at deep seated deposits where the explorer may never hold a mine at all, and its economics rest on the licensee’s share of the auction premium when a block developed from its exploration is later auctioned, so the instrument resembles an option on information rather than a preliminary form of lease. A reader who keeps the three instruments apart, mining lease for the proved, composite licence for the indicated, exploration licence for the speculative, holds the design of the grant system in a single sentence.

Conservation, mining plans and the discipline of working

Grant and money occupy most accounts of the Act, but the statute also governs how a mine is worked, and it does so mainly through Section 18 and the Mineral Conservation and Development Rules made under it. Section 18 obliges the Central Government to take all such steps as may be necessary for the conservation and systematic development of minerals in India and for the protection of the environment by preventing or controlling pollution caused by prospecting or mining operations, and declares that rules may be made for that purpose. Under those rules every mining lease requires a mining plan, prepared by a recognised qualified person and approved by the Indian Bureau of Mines or the authorised state agency, setting out the geology, the reserves, the method and sequence of working, the annual production, the handling of waste and topsoil, the reclamation of worked areas and the programme for the five year period the plan covers, with periodic review. A scheme of prospecting and a scheme of mining perform the same function for the earlier stages. Departures from the approved plan are themselves violations, actionable independently of any question about the validity of the lease, which is how the conservation regime reaches the daily operation of a mine rather than its paperwork.

The closure obligation completes the discipline. The rules require a progressive mine closure plan from the outset and a final mine closure plan before abandonment, supported by financial assurance, so that the cost of restoring the site is planned and secured while the mine is earning rather than pursued after the operator has departed. The star rating system, administered by the Indian Bureau of Mines, scores mines on sustainable development criteria and publishes the ratings, converting compliance into reputation. None of this is glamorous, and little of it is litigated at the level of principle, but it is the part of the Act that determines what a mined landscape looks like a generation later, and the contrast between districts where the plan discipline was enforced and districts where extraction ran ahead of it is visible from the air.

The Indian Bureau of Mines also performs the function on which the fiscal system silently depends: the publication of average sale prices. Royalty on an ad valorem basis, the auction premium, the foundation and trust contributions and the upfront amounts are all computed from the value of the mineral, and value for a mineral sold within an integrated plant, or despatched to a related party, cannot simply be read from an invoice. The Bureau collects returns from lessees, computes and publishes average sale prices by mineral, grade and State, and those published prices become the base on which the statutory percentages operate. A dispute about an average sale price is therefore a dispute about every payment in the chain at once, and the Bureau’s price circulars are among the most consequential and least read documents in Indian mining law.

Minerals in Scheduled Areas and the consent layer

A further body of law overlays the Act where the land is in a Scheduled Area. In Samatha v State of Andhra Pradesh, decided in 1997, the Supreme Court held that mining leases granted to non tribal persons in Scheduled Areas offended the constitutional scheme for the protection of tribal land under the Fifth Schedule and the state land transfer regulation, and that the transfer of tribal land for mining to outsiders was impermissible, with government and cooperative arrangements treated differently from private commercial grants. The judgment made the Scheduled Areas the most legally sensitive mining geography in the country, and its reasoning has been debated, distinguished and pressed into service in disputes far from its facts. The Panchayats (Extension to the Scheduled Areas) Act, 1996 then gave the Gram Sabha and the Panchayat defined roles, including consultation before land acquisition in Scheduled Areas, ownership of minor forest produce, and a mandatory recommendation of the Gram Sabha or the Panchayat before the grant of a prospecting licence or mining lease for minor minerals in such areas. The forest rights legislation added the requirement that forest land not be diverted without recognition of the rights of forest dwelling communities and the processes that legislation prescribes. The practical consequence is that a concession granted under the MMDR Act over land in a Scheduled Area or over forest land is the beginning of the legal inquiry, not the end of it, and a grant that satisfies the mining statute may still fail at the consent layer. Advisers who treat the mining lease as the whole title are the recurring source of the sector’s most expensive surprises.

The errors other accounts make

Because the subject sits at the meeting point of tax, federalism and industrial policy, it attracts confident summary, and the summaries repeat a small set of mistakes. It is worth collecting them, because each one reverses a proposition this article has established.

Concessions are described as available on application, with the State choosing among applicants. That was the law before 2015. For the minerals within the auction provisions the only route is competitive bidding, and an application in the old sense does not exist. Royalty is described as a tax collected by the Centre. Royalty is not a tax, it is fixed by the Centre and it is collected by and paid to the State as owner of the mineral, and confusing the rate fixer with the payee inverts the fiscal story. The 2024 judgment is described as permitting States to tax mining without limit. It restored competence under two entries and left every individual levy to be tested on its character, its measure and the equality guarantee, and it left Parliament free to impose the limitation Entry 50 contemplates. The judgment is also described as retrospective without qualification. Its temporal operation is governed by the order of 14 August 2024, with a cut off at 1 April 2005, a waiver of interest and penalty for the period before 25 July 2024 and payment staggered over twelve years from 1 April 2026, and any account that omits those conditions overstates the liability by a generation. Minor minerals are described as a central subject, or sand is discussed as if its royalty and its lease terms were set in New Delhi. Minor minerals are a state subject under Section 15, and the variation between States is the substance of the matter. And the District Mineral Foundation is described as a tax. It is a contribution by lessees to a district trust under Section 9B, calculated as a proportion of royalty, and its character as a statutory contribution for a defined beneficiary class is what distinguishes it from the general revenues into which a tax disappears.

The sector the statute governs

The Act’s abstractions land on a physical industry of a particular shape. India mines a large number of minerals, but production value is concentrated in a handful: coal and lignite for energy, iron ore for steel, and a long tail of metallic and industrial minerals of which chromite, manganese, bauxite, limestone, zinc and copper carry most of the remaining value. Limestone illustrates the reach of the statute into ordinary life, since it is a major mineral under the Act, mined in large leases to feed cement plants, and its regulation is the regulation of the price of construction in much of the country. The mineral bearing geography is concentrated in a belt of States in the east and centre of the country together with the western deposits of Rajasthan and Gujarat and the southern districts of Karnataka, which is why the fiscal questions in this article are existential for some state budgets and academic for others. A State with no significant mineral production gains nothing from Entry 50 and loses nothing by royalty centralisation, while a State whose districts carry the iron ore and coal of the national economy experiences both as the central facts of its public finance. Federalism arguments in this field are therefore never only about doctrine. They are about which States hold the asset, and the doctrine is argued with an intensity proportioned to the geology.

Exploration is the sector’s acknowledged weakness and the thread that connects the trust of 2015, the private agencies of 2021 and the exploration licence of 2023. A mature mining jurisdiction spends heavily on exploration relative to production, because a mine is a wasting asset and the inventory of proved blocks must be replenished continuously or the auction system runs out of goods to sell. India’s proved inventory was built largely by public agencies over decades, and the rate at which new blocks with reliable geological data have been offered has repeatedly fallen short of the rate at which leases expire and are cancelled. Each reform since 2015 can be read as an attempt to widen the exploration funnel: the trust to fund it, the composite licence to reward it, the accredited agencies to multiply the explorers, and the exploration licence to make deep seated exploration a tradeable speculation rather than a sunk cost. Whether the funnel has widened enough is an empirical question on which the auction record of blocks that failed for want of adequate data is the most telling evidence.

Royalty revision: the quiet politics of the Second Schedule

Royalty rates sit in the Second Schedule, and their revision is the most consequential routine act performed under the Act. The Central Government may amend the Schedule by notification, and Section 9 restrains it from enhancing the rate for a mineral more than once during a period of three years. The restraint was written as a protection for lessees against fiscal instability, and in a period of administered pricing it functioned that way. Across longer periods it functioned differently, as a ratchet on the States’ income. Rates for important minerals remained unchanged across intervals in which commodity prices rose several fold, and where a rate was expressed as a fixed sum per tonne rather than as a percentage of price, inflation alone transferred value from the owning State to the extracting lessee year by year. The movement toward ad valorem rates for the major minerals was the system’s own correction, since a percentage of sale price revises itself with the market, and the remaining per tonne rates are concentrated in minerals whose prices are comparatively stable or whose administration would not bear a valuation inquiry in every district.

The politics of revision are structural rather than personal. The Centre fixes the rate, the State receives the money, the industry pays it, and the consumer of steel, cement or power ultimately bears it. A Centre weighing a revision balances the revenue claims of a small number of mineral bearing States against the price consequences for the whole country, and it hears the industry directly and the States through intergovernmental channels in which the producing States are a minority. A revision committee therefore characteristically recommends less than the producing States seek and more than the industry offers, and the three year bar then locks the compromise in while prices move on. This is the concrete grievance behind the abstract Entry 50 argument, and it should be understood before the 2024 judgment is treated as a windfall. The States did not seek a second revenue stream because they were greedy for revenue in general. They sought it because the first stream’s tap was in another government’s hand, on another government’s timetable, and the judgment handed them a tap of their own. Whether two taps on the same pipe produce a workable fiscal system is the question the next decade of state legislation will answer, and it is a question about design, not about competence.

Coal, atomic minerals and the edges of the Act

Coal and lignite sit in Part A of the First Schedule and inside the Act, but the working law of a coal block cannot be read out of the Act alone. The nationalisation statutes of the 1970s vested coal mining in public ownership and confined private participation within narrow limits, the captive route opened by amendment allowed specified end users to mine for their own consumption, and the cancellation of the block allocations in 2014, in the litigation that held the allocation process arbitrary, led to a separate statute for coal block auctions and allotments, followed by the opening of commercial coal mining. The MMDR Act supplies the lease and royalty frame, while the coal specific legislation supplies the allocation events that dominate that sector’s history. A reader who applies the general auction provisions to a coal block without the coal statutes will misunderstand both.

Atomic minerals occupy the opposite edge. Part B of the First Schedule lists the minerals of interest to the atomic energy programme, and the scheme of the Act, read with the atomic energy legislation, reserves their exploitation to the State acting through its own companies and departments, because the same substances are the feedstock of a strategic programme and their occurrence, grade and movement are matters of national security as much as they are matters of commerce. The 2023 amendment’s removal of six of them is therefore more significant than its length suggests. It was a decision that certain minerals, classified as atomic by association rather than by use in the programme, were worth more to the country as inputs to batteries, alloys and electronics in private hands than as reserved substances in public hands, and it required the legislative act of delisting before a single block could be offered. The boundary of Part B is thus a live instrument of policy, and future amendments will be argued at exactly that boundary, mineral by mineral.

Offshore minerals required their own statute, the Offshore Areas Mineral (Development and Regulation) Act, 2002, because the territorial sea and the continental shelf raise questions of sovereign rights and of the division between the Union and the coastal States that the land based statute was not drafted to answer, and the offshore regime was itself substantially amended in 2023 to introduce auction there as well. Petroleum and natural gas, excluded from the Act by the definition of minerals, are governed by the Oilfields legislation and the petroleum and natural gas rules, under licensing and later revenue sharing regimes administered by the Union. The pattern across all four regimes is the same and is worth noticing: exclusion from the MMDR Act has never meant exclusion from public control, only the construction of a parallel control suited to a different physical and constitutional setting.

What a mining file actually contains

Practitioners test their understanding of this Act against documents, and the documents of a single concession tell the whole statutory story in miniature. The file opens with the geological report and the block summary on which the State decided to offer the area, which is where the level of exploration is recorded and where a later dispute about reserves will begin. The notice inviting tender follows, with the eligibility criteria, the bid parameters and the conditions of grant, and it is the document against which any challenge to the auction will be measured. The bid history and the declaration of the preferred bidder record the price discovery. The letter of intent converts the bid into obligations. Behind it sits the previous approval of the Central Government where the mineral is in the First Schedule, the approval of the mining plan, the environmental clearance with its conditions and the record of the public hearing, the forest clearance where applicable with its compensatory afforestation and net present value payments, the consent to establish and consent to operate under the pollution legislation, and the surface rights arrangements with the landowners or the acquisition proceedings that displaced them. The executed lease deed, with its covenants on working, reporting, assignment and restoration, is the contract the Supreme Court had in mind when it called royalty a contractual consideration, and it incorporates the statute by reference at every operative clause. Behind the deed sits the running file: monthly and annual returns, the Indian Bureau of Mines inspection notes, the average sale price circulars for the relevant grades, the royalty assessments, the foundation and trust contribution challans, the dead rent demands for idle years, and the closure plan with its financial assurance. Advisers who assemble such a file for a hearing often keep the tender documents, geological summaries and clearance papers in a single deck, using a presentation viewer for the assembled mining file to move between them. A lawyer who can read that file can answer almost any mining question, and a lawyer who reads only the Act will be surprised by how much of the answer lives in documents the Act authorises but does not contain.

That is also why mining disputes so rarely turn on a single provision. A demand for recovery of the value of illegally raised mineral will be met by arguments about the approved quantity in the mining plan, the conditions of the environmental clearance, the measurement of the pit, the grade and price to be applied and the authority of the officer who raised the demand, each drawn from a different document in the file, and the statutory provision under which the demand is raised will be the least contested element in the case. The Act is the skeleton. The file is the body.

The States after 2024: the design questions

The restored taxing power arrives in state legislatures as a set of design choices, and the choices determine whether the power becomes a revenue instrument or a litigation generator. The first choice is the base. A tax on mineral rights may be measured by the quantity despatched, by the value of the mineral, by the royalty paid, by the area held, or by the consideration received for the right, and each measure has a different character in law and a different incidence in practice: a measure tied to royalty invites the argument that the levy is a cess on royalty of the kind in issue in 1990, while a measure tied to the land invites assessment under Entry 49 and a different line of authority. The second choice is the relationship to the existing statutory payments. A legislature that states expressly that its tax is in addition to royalty and to the foundation and trust contributions, and that defines its base independently of them, drafts against the challenges it can foresee. The third choice is temporal: the order of August 2024 permits demands for the period from 1 April 2005 subject to its conditions, but a State must still enact or identify the charging provision under which a demand for a past year is raised, and the difference between a tax that existed under a statute struck down on a mistaken view of competence and a tax enacted for the first time after 2024 is a difference assessees will litigate. The fourth choice is rate discipline. A State that levies at a level its mines can bear while competing with the same mineral from a neighbouring State keeps its royalty, its premium and its employment; a State that treats the restored power as an occasion to maximise the rate on a captive base may discover that the base is less captive than it appeared, because new investment, unlike an existing pit, can choose its State.

Parliament retains the last word the Constitution gave it. Entry 50 subjects the State power to any limitations imposed by Parliament by law relating to mineral development, and the judgment of 2024 held only that the Act as it stands imposes no such limitation. Parliament could enact one, whether as a ceiling on state levies, a harmonisation mechanism, or a condition that a state tax be credited against royalty, and it would be acting within the entry’s express terms if it did. Whether it should is the national version of the industry argument, and it will be pressed on the Union by the consuming States and the steel and cement industries with the same force with which the producing States pressed the competence argument on the Court. The constitutional settlement of 2024 is therefore best described as a relocation of the argument, from the courts to the legislatures, with the Court having determined which legislatures hold the pen in the first instance. That is a considerable thing to have settled, and it is not the same thing as having settled the fiscal system.

Communities, work and the uses of the money

Mining is worked by people in places, and the Act’s institutions touch them at three points that deserve recording together. The first is the hearing and consent layer, where affected persons appear as objectors and where the quality of the process determines whether a project begins with local knowledge or with local resistance. The second is employment and contracting around the mine, which is the benefit a district actually experiences, and which the statute influences only indirectly through the scale and duration of the operation it authorises. The third is the District Mineral Foundation, which is the one institution in the statute addressed to affected persons as beneficiaries rather than as parties. The debate about the Foundations has been conducted largely on utilisation figures, and the figures support two readings. On one reading the accumulation of unspent balances in several major districts, in the presence of evident need in water, health and nutrition, is an institutional failure of design and capacity, and the diversion of funds to general district infrastructure dilutes the statutory purpose of benefit to persons and areas affected by mining. On the other reading the Foundations are young institutions in districts with thin administrative capacity, the spending rules were tightened as weaknesses appeared, and the balances represent a deliberate accumulation for long term obligations, including the post closure needs of districts whose income from mining will end. Both readings can be supported from the record of particular districts, which is itself the finding: the Act created a national institution whose performance is determined locally, and the variation is the story. For the reader in a mining district the practical questions are concrete and answerable from public documents: whether the Foundation for the district has been constituted, what its annual plan and budget are, what share of its expenditure went to the high priority subjects the national programme names, and which villages the works reached. Those questions are the point at which a statute pillar becomes a citizen’s instrument.

Enforcement in practice: how an illegal mining case is built

An illegal mining case under the Act is built from measurements before it is built from law. The inspecting officer records the pit, its dimensions and its position against the approved lease boundary and the mining plan, because the commonest forms of illegality are geographic and quantitative rather than documentary: extraction outside the leased area, extraction below or beyond the approved depth, extraction in excess of the quantity the environmental clearance permits, and extraction from an area whose lease has expired or whose clearance has lapsed. Satellite imagery and drone survey have changed the evidentiary basis of these cases, and the mining surveillance system administered with satellite inputs generates alerts from the comparison of imagery against lease boundaries, which are then verified on the ground. Once the quantity raised without lawful authority is estimated, the recovery provision converts it into a demand for the price of the mineral together with royalty, rent and tax for the period, and that demand, rather than a prosecution, is where the money is. Prosecution under Section 21 proceeds separately and only on an authorised complaint under Section 22, and in practice the criminal process is reserved for organised unauthorised extraction, for transport networks and for repeat offenders, while the revenue process carries the ordinary case. Vehicles and mineral in transit are dealt with under the state rules made under Section 23C, which provide for check posts, transit passes in electronic form, seizure and compounding on terms the rules prescribe, and it is at the check post, not in the courtroom, that most citizens encounter mining law enforcement.

The defences are as standardised as the case. The lessee contests the measurement, the grade attributed to the mineral and therefore the price, the proposition that the clearance rather than the lease fixed the lawful quantity, the authority of the officer, and the computation of the period. In the litigation that followed the large demands in Odisha and Karnataka, the courts separated those questions carefully, upholding the principle of full recovery for mineral raised without or beyond clearance while correcting computations that had swept lawful production into the demand. That separation is the mature position of the case law: illegality is defined by the instrument that authorised the extraction, recovery is measured by the value of what was taken without authority, and neither proposition relieves the State of proving the quantity it alleges. For an affected community the corresponding practical point is that the documents are public in large part: the lease deed, the approved plan quantities and the clearance conditions are obtainable, and a complaint that identifies the instrument breached and the quantity exceeded is a complaint an administration can act on, where a general allegation of illegal mining is not.

Two comparisons that locate the Indian settlement

Other mining jurisdictions divide the same functions differently, and two contrasts locate the Indian choices. Several federations leave mineral taxation largely to the resource owning province or state, with the national government taxing income from mining as it taxes other income, so the argument that consumed India for thirty four years does not arise in the same form, because no national statute fixes the royalty and no one supposes that fixing it disables the owner. India’s difficulty was self created in a specific way: the owner of the mineral and the fixer of its price are different governments, and the price fixing statute was read as a tax disabling statute. The 2024 judgment removed the second limb of that difficulty and left the first, which is a workable arrangement provided the price fixing is done well and often. The second contrast concerns the district fund. Resource jurisdictions increasingly require a share of extraction value to be committed to affected communities, whether by statute, by agreement with indigenous owners or by negotiated benefit agreements attached to the project. India’s District Mineral Foundation is distinctive in being a statutory levy on all lessees at nationally framed rates, administered by a district trust, rather than a bargain struck project by project. A statutory levy is more uniform and less negotiable, and it reaches small mines that no one would bargain with, but it cannot be tailored to the particular harms of a particular valley, which is the thing a negotiated agreement does best. Both contrasts point the same way: the Indian statute prefers uniform national instruments administered locally, and its successes and failures are the successes and failures of that preference.

Assessment, revision and the forums where mining disputes are decided

A statute of this kind is only as real as the forums that enforce it, and mining disputes are distributed across more forums than a newcomer expects. The ordinary run of disputes begins inside the administration. A royalty assessment, a dead rent demand, a recovery demand under Section 21(5) or a demand for a foundation contribution is raised by the district or state mining administration on the basis of returns, inspection reports and measurement, and the lessee’s first remedies are departmental: representation, rectification of the computation and appeal under the rules governing the subject. Over those orders sits a revisional power. Section 30 of the Act confers on the Central Government a power of revision in respect of orders made by a State Government in the matters the section covers, and the revision application has been for decades the standard route by which a major mineral lessee challenges a state order on grant, renewal in the older regime, termination or assessment, with the Central Government deciding through its revisional authority on the record of the State. For minor minerals the corresponding remedies lie inside the state rules, since the State is both rule maker and grantor, and the forum is the appellate authority the state rules name.

Beyond the departmental tier, the writ jurisdiction of the High Courts carries most of the litigation of principle: challenges to auction design and eligibility, to cancellation and termination, to the validity of state rules and, after 2024, to the character of state levies. The National Green Tribunal takes the environmental questions, including clearance conditions, illegal extraction damage and restoration, and its jurisdiction overlaps the mining administration’s in every case where illegality is measured by a clearance. Special Courts under Section 30B take the prosecutions. The result is that a single mine may be the subject of proceedings in four forums at once, each confined to its own question, and a party that wins the royalty argument in revision may lose the clearance argument in the Tribunal on the same facts. Advisers therefore map a mining dispute by forum before they map it by provision, and they plead the statutory scheme differently in each: the Act as a contract and price code before the revisional authority, the Act as an allocation code before the High Court, and the Act as a conservation code before the Tribunal.

Two procedural features deserve emphasis because they shape outcomes quietly. The first is limitation and the age of mining files. Concessions granted decades ago generate disputes about documents executed under repealed rules, and the transitional provisions of each amendment become the real law of the case, which is why the sorting clauses of 2015 and 2021 occupy so much reported litigation although they govern a closed class of files. The second is the burden of measurement. In recovery proceedings the State must establish the quantity raised without authority, and the contest is usually about survey method, the treatment of stocks at the pit head and the boundary between the leased area and the area actually worked. Courts have accepted satellite imagery and joint measurement as evidence while insisting that a demand rest on a verifiable quantity rather than on an estimate of what a mine of that size would ordinarily produce. Both features reward the party that kept the file, which returns the subject to the point made earlier: in mining law the record is the argument, and the statute is the index to the record.

Frequently Asked Questions

Q: What does the MMDR Act regulate?

The Act regulates the grant and working of mineral concessions for minerals other than mineral oils, meaning reconnaissance permits, prospecting licences, composite licences, exploration licences and mining leases. It fixes royalty in the Second Schedule and dead rent in the Third Schedule, creates the District Mineral Foundation and the National Mineral Exploration Trust, prescribes offences and recovery for unauthorised mining, and allocates rule making between the Central Government for major minerals and the State Governments for minor minerals. It works beside the environmental, forest and land laws, which decide much of what a concession holder may actually do.

Q: What is the difference between major and minor minerals?

Minor minerals are the substances named in Section 3(e): building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral the Central Government notifies as minor. They are governed by rules the State Government makes under Section 15, which fix their royalty, lease periods and grant procedure State by State. Every other mineral is a major mineral, governed by the Act itself and by central rules, with royalty in the Second Schedule and grants made by auction under the central scheme. The distinction is legal rather than geological, and it decides which government a miner deals with.

Q: How are mining concessions granted now?

For the minerals within the auction provisions, concessions are granted by competitive bidding conducted by the State Government. The State notifies the block with its geological report and eligibility conditions, bidders compete on the percentage of the value of mineral despatched that they will pay in addition to royalty, and the highest bidder receives a letter of intent, obtains the mining plan approval and the environmental and forest clearances, pays the upfront amount and performance security, and executes the lease. Mining leases are granted where the deposit is proved, composite licences where it is indicated, and for the critical and strategic minerals in Part D of the First Schedule the Central Government conducts the auction.

Q: What are the District Mineral Foundation and the exploration trust?

The District Mineral Foundation, created by Section 9B, is a trust established in every district affected by mining related operations, working for the interest and benefit of the persons and areas affected. Lessees fund it by a contribution fixed as a proportion of royalty: thirty per cent of royalty for leases granted before 12 January 2015 and ten per cent for leases granted on or after that date. The National Mineral Exploration Trust, created by Section 9C, is a central trust funded by a contribution of two per cent of royalty from mining lease and composite licence holders, and it finances regional and detailed exploration so that new blocks can be identified and offered.

Q: What did the 2023 amendment do for critical minerals?

The amendment of 2023 inserted Part D in the First Schedule listing twenty four critical and strategic minerals, created an exploration licence for deep seated and critical minerals listed in the Seventh Schedule, and empowered the Central Government under Section 11D to auction mining leases and composite licences for the Part D minerals, with the revenue going to the State where the block lies. It also omitted six minerals from the atomic minerals list in Part B of the First Schedule, namely lithium, beryllium, niobium, titanium, tantalum and zirconium bearing minerals, so that concessions in them could be granted to private bidders. Royalty rates for lithium, niobium and rare earth elements were then specified in the Second Schedule.

Q: Did the Supreme Court hold royalty on minerals to be a tax?

A Bench of seven judges held in 1990, in India Cement Ltd v State of Tamil Nadu, that royalty is a tax, and that holding stood for thirty four years. A Bench of five judges in 2004, in State of West Bengal v Kesoram Industries Ltd, concluded that the proposition rested on an error but could not overrule a larger Bench. On 25 July 2024 a Bench of nine judges in Mineral Area Development Authority v Steel Authority of India held by eight to one that royalty is not a tax but a contractual consideration under the mining lease, overruled India Cement and affirmed Kesoram. That is the settled position.

Q: Can states tax mineral rights?

Yes. The judgment of 25 July 2024 held that the power to tax mineral rights belongs to the state legislatures under Entry 50 of the State List, that Entry 54 of the Union List is a regulatory entry conferring no taxing power on Parliament, that Parliament cannot reach the subject through its residuary power, and that the MMDR Act imposes no limitation on the State power of the kind Entry 50 contemplates. States may also tax mineral bearing land under Entry 49 of the State List, since land in that entry includes mineral bearing land. Each particular state levy must still be valid on its own terms, and Parliament remains free to enact a limitation.

Q: What penalties apply to illegal mining?

Section 21 punishes a person who undertakes reconnaissance, prospecting or mining operations without a concession, or who transports or stores mineral unlawfully, with imprisonment that may extend to five years and a fine that may extend to five lakh rupees per hectare of the area, with an additional daily fine for a continuing contravention after conviction. Section 21(5) separately empowers the State Government to recover the mineral raised without lawful authority or, where it has been disposed of, its price, together with rent, royalty and tax for the period of unauthorised occupation. Section 22 bars a court from taking cognizance except on a written complaint by an authorised person, and state rules under Section 23C govern check posts, transit passes and seizure.

Q: Who fixes the rates of royalty, and who receives the money?

The Central Government fixes the rates, which are set out in the Second Schedule to the Act and may be amended by notification, subject to the rule in Section 9 that the rate for a mineral shall not be enhanced more than once in a period of three years. The money is received by the State Government in which the mine lies, because the State is the owner of the mineral and the lessor under the mining lease. That division, under which one government sets the price and another receives it, is the practical grievance that produced the long litigation over whether the States could levy a tax of their own on mineral rights.

Q: What is a composite licence, and how does it differ from a mining lease?

A composite licence is a prospecting licence cum mining lease, a two stage concession granted through auction for an area where a deposit is indicated but not proved to the standard a mining investment requires. The holder first prospects under the licence, and on proving the deposit moves to mining operations over the retained area under the same concession. A mining lease, by contrast, is granted for an area where exploration has already established the deposit, and it authorises mining operations from the outset. The distinction allocates exploration risk: the mining lease buyer purchases a known asset, while the composite licensee pays for the chance to convert information into one.

Q: What happens when a mining lease expires?

On expiry the lease is not renewed. Section 8A provides that a mining lease is granted for fifty years and that on the expiry of that period the area is put to auction again, so the outgoing lessee has no right of renewal and no preference in the fresh grant. The amendment of 2021 softened the practical consequences of that rule by providing that the valid rights, approvals, clearances and licences of the former lessee continue and vest in the successful bidder, so that the mine can restart without repeating the clearance process. The outgoing lessee must also complete the closure obligations under the approved final mine closure plan, supported by the financial assurance given for that purpose.

Q: How is royalty different from a state tax on mineral rights?

Royalty is the price of the mineral, paid by the lessee to the State as owner under the lease and at rates fixed in the Second Schedule, and it is payable because the lessee takes the mineral. A tax on mineral rights is a sovereign exaction levied by a state legislature under Entry 50 of the State List, payable because the legislature has imposed it, without any corresponding transfer of property. The distinction is the one the nine judge Bench drew in 2024: a tax is a compulsory contribution without a direct quid pro quo, while royalty is consideration for what is extracted. Because they rest on different foundations, the two can be charged on the same activity without one displacing the other.

Q: From what date can states raise tax demands after the 2024 judgment?

The merits judgment of 25 July 2024 settled competence, and an order of 14 August 2024 settled the past. The Court declined to make the judgment prospective only. It directed that States may levy or renew demands under Entries 49 and 50 in accordance with the judgment, but that a demand shall not operate on transactions prior to 1 April 2005. It waived the levy of interest and penalty on demands made for the period before 25 July 2024 for all assessees. And it staggered payment of the demands in instalments over twelve years commencing on 1 April 2026. A demand that ignores those three conditions misstates the law.

Q: Which minerals were removed from the atomic minerals list in 2023?

Six entries were omitted from Part B of the First Schedule, which lists atomic minerals: lithium bearing minerals, beryllium bearing minerals, niobium bearing minerals, titanium bearing minerals, tantalum bearing minerals and zirconium bearing minerals. They had been classified as atomic minerals because of their association with the atomic energy programme, and concessions in them were in practice reserved to government companies. Their removal allowed them to be offered to private bidders, and they were included in the list of twenty four critical and strategic minerals in Part D of the First Schedule, for which the Central Government conducts the auction of mining leases and composite licences.

Q: What must a bidder pay besides the price it bids at auction?

The successful bidder pays an upfront amount computed from the value of the estimated resources of the block, in instalments, and furnishes a performance security. During the lease it pays royalty at the Second Schedule rate, dead rent where royalty does not exceed it, surface rent and the applicable fees, a contribution to the District Mineral Foundation of ten per cent of royalty for a lease granted through auction, a contribution to the National Mineral Exploration Trust of two per cent of royalty, and the auction premium it bid, expressed as a percentage of the value of mineral despatched. It also bears the cost of the mining plan, the environmental and forest clearance process and the financial assurance for mine closure.

Q: Can a mining lease be transferred to another person?

Yes, subject to the conditions of the Act and the rules. The reform of 2015 made leases granted through auction transferable to a person eligible to hold the concession, on payment of the transfer charge then prescribed, because an asset that cannot be transferred cannot be financed or moved to a better operator. The amendment of 2021 removed the restrictions on transfer of mineral concessions that had not been granted through auction and removed the transfer charge, and it also provided for the passing of concessions on the death of a holder and in insolvency and resolution situations. A transfer does not alter the term of the lease or the conditions attached to it, which bind the transferee as they bound the transferor.

Q: What did the 2021 amendment change for captive mines?

Before 2021 a block could be reserved for a specified end use and granted as a captive mine to feed a linked plant, and the mineral could be used only for that purpose. The amendment of 2021 provided that no mine shall be reserved for a particular end use in future auctions, ending the captive category prospectively. For existing captive mines it permitted the sale of up to fifty per cent of the minerals produced in a year in the open market, after meeting the requirement of the linked end use plant, on payment of an additional amount prescribed in the Sixth Schedule. The change was aimed at mineral left unproduced because a plant needed less than its mine could yield.

Q: Why does the Central Government have to approve a state grant?

Section 5 provides that the State Government shall not grant a reconnaissance permit, prospecting licence or mining lease for the minerals specified in the First Schedule without the previous approval of the Central Government. The requirement is the administrative expression of the declaration in Section 2: the Union took the regulation of mines and the development of minerals under its control to the extent the Act provides, and for the scheduled minerals it retained a consent right over individual grants while leaving the grant itself, the auction and the execution of the lease to the State. In practice the approval letter is the central document in the file of a major mineral concession, and a grant made without it is vulnerable.

Q: How is the value of a mineral calculated when royalty is charged on price?

For minerals charged ad valorem, royalty and the other statutory payments are computed on the value of the mineral despatched, and that value is taken from the average sale price published by the Indian Bureau of Mines for the relevant mineral, grade and State. The Bureau computes those prices from the returns lessees file, and publication matters because a large part of production moves within integrated plants or to related buyers, where an invoice price would not be an arm’s length measure. Using a published average price gives the State, the lessee and the auction system a common base, and disputes about the price circular therefore affect royalty, auction premium and both fund contributions at once.

Q: Does the Act require a Gram Sabha to be consulted before a mine is granted?

The MMDR Act itself does not contain a Gram Sabha consent requirement. The consultation layer comes from other statutes that operate on the same land. The Panchayats (Extension to the Scheduled Areas) Act, 1996 requires consultation with the Gram Sabha or the Panchayat before land acquisition in Scheduled Areas and makes their recommendation mandatory before the grant of a prospecting licence or mining lease for minor minerals in such areas. The forest rights legislation requires the recognition of forest rights and the processes it prescribes before forest land is diverted for mining. A concession that satisfies the mining statute may therefore still be incomplete, and in Scheduled Areas and forest areas the additional processes must be checked before the grant is treated as effective.