Union Govt’s Latest Amendment to MMDR Act is Unconstitutional. Will the Supreme Court Declare Them So?

The recently amended Mines & Minerals (Development & Regulation) Act, 2026, is a matter of grave concern for India as this legislation puts paid to the constitutional framework of fiscal federalism. However, this should not be seen as a one-off move by the ruling dispensation to undermine our constitution. The Modi government has enacted several amendments to the MMDR Act, 1957, in the last 12 years; the objective in each case has been to progressively pave the ground for a trouble-free hand-over of the country’s mineral wealth to its crony business houses. 

The latest amendments to the Act is, in a way, a culmination of this more than a decade-long persistent effort – the Modi establishment can now pat itself on the back as it has largely completed its devious mission.

It must be admitted that Prime Minister Narendra Modi was clear about his goals from the very outset. He knew that the country’s huge mineral resources could be bartered away to his cronies within the big business for a large consideration; but the constitutional provisions were an obvious bottleneck. The Indian constitution had provided that the control over mines and minerals were the close preserve of the states; the Union government’s role was merely to regulate the broad parameters for the operational efficiency of the sector.

In the original constitutional framework, entries 49 and 50 of the State List had clearly enumerated the power of the states to tax the mineral wealth within their respective jurisdiction – entry 50 pertained to the tax on the mineral rights, and entry 49 related to the tax on the mineral-bearing land.

It’s true that Entry 54 of the Union List gave power to the Union government – if ever the need arose for it – to impose limitations on the state’s power over the mineral rights. But successive governments since independence had refrained from exercising that power to uphold the framework of fiscal federalism, especially as there was no imminent threat to the Union’s power to hold the nation together.

Prime Minister Modi, however, had different ideas; he had a master plan to take complete control of all the critical resources of the country so that he could distribute it to his crony business houses. He went about this task systematically. Within a year of coming to power, in 2015, his government amended the MMDR Act to expand the largesse given to the mine owners.

MMDR Act opened up to crony capitalists

It may be noted that mines were initially largely a public sector venture; but after the liberalisation push by the Narasimha Rao government in 1991, mines were partially opened to the private sector. Under the National Mineral Policy, 1993, private companies were allowed to operate mines strictly for captive use. These companies could extract minerals for their power, steel or cement plants, but not for open sale.

This changed in 2015 when the Modi government opened up the mines to private parties for commercial use.

That was not all. 

Before 2015, each mine lease owner was granted a maximum of 10 square kilometres radius of mineral-bearing land in a state; moreover, the lease was granted for a maximum of 30 years. These provisions were in place to prevent the monopolisation of mineral resources by a few big business groups.

In the 2015 amendment to the Act, the Modi government laid the foundation for monopoly control of the mineral wealth. The tenure of each lease was extended from 30 to 50 years; but in case of the area of the mine lease, the diabolical intent of the Modi government was more visible – the maximum area was just not extended to, say, 15-odd sq. kilometres (from the existing 10 sq kilometres), rather the Union government arrogated unto itself the power to grant a mine lease extending to any large area it pleased, without any limitations whatsoever.

Also read: What Odisha Stands to Lose from the Modi Government's New Mining Law

In order to facilitate the crony capitalists, the Modi government also amended the existing rules that required prior coal mining experience for participating in coal block auctions; the commercial coal-mining was opened to non-coal companies.

In subsequent amendments in 2023, the Modi government went a step further to benefit the cronies; it took 24 strategic and critical minerals – lithium, titanium, beryllium et al – out from the exclusive purview of the public sector and offered them to the private sector on a platter. 

Through a similar amendment to the MMDR Act, the Modi government also allowed existing mine leaseholders to take ownership of critical and strategic minerals found in their respective blocks without any extra royalty, reversing the earlier decision mandated by law.

A Supreme Court ruling

A majority ruling by a nine-judge constitutional bench of the Supreme Court in July 2024, Mineral Area Development Authority v. Steel Authority of India, however, came as a sharp rebuke to the Modi dispensation. The D.Y. Chandrachud-led bench virtually set aside an earlier ruling by a  seven-judge bench in India Cement Ltd v. State of Tamil Nadu, 1990. 

The seven-judge bench had adjudicated that the royalty granted to the states under the MMDR Act was equivalent to tax and therefore, the states were prohibited from imposing any additional tax on the mineral rights.

The Chandrachud bench categorically asserted that royalty was not a tax and the states were free to levy taxes, in addition to the collection of royalties as prescribed by law. 

Three weeks later, in August 2026, the same bench offered a compensation package to the affected states for the loss of the tax revenue from mines for almost 35 years: as per the formula devised by the top court, the lease owners were required to pay the tax with retrospective effect from April 2005 till July 2025. 

The apex court granted to the mine owners the reprieve that the penalties for late payment would be waived and the payment could be made in 12 equal installments from April 2026.

This ruling by the Supreme Court was a serious setback to the Modi government’s concerted plan to take complete control of the mines at the expense of the states. 

In a bid to undo the damage done to its devious design, the Modi government then enacted the July 2026 amendment – an obvious measure to override the decision of the Supreme Court – incorporated as Section 9D in the MMDR Act. 

What is Section 9D of MMDR Act?

Section 9D categorically stated that states are prohibited from imposing taxes on mine lease holders, except under the explicit sanction of the Union government. 

So, for the first time, states were reduced to being supplicants, not autonomous actors, in a field clearly assigned to their jurisdiction by the constitution. By this egregious provision, a relatively poor state like Odisha, for example, could lose Rs 12,000 crore annually.

The Modi government’s most daring defiance lay in its decision to nullify the compensation award the Supreme Court granted to states for the period between 2005 and 2025. The amended Act allowed the mine lease holders to thumb their noses at the apex court ruling and withhold making payments to the states. The states were, in effect, prohibited from resorting to any coercive measures to recover outstanding tax from the mine leaseholders.

This olive branch extended to the crony capitalists by the Modi regime meant a state like Odisha could lose more than Rs 1 lakh crore.

Another egregious provision that struck at the heart of the right to equality was that while states, as a whole, were now barred from collecting the outstanding tax from the lease holders, some of them – the states which had already collected a part of the outstanding dues – were not required to refund. As a result, leaseholders who respected the Supreme Court’s mandate and paid up turned out to be losers, and those who defied the court ruling and refused to pay up ended up being the winners.

The 2026 amendment to the MMDR Act is clearly intended to show the Supreme Court its place under the Modi dispensation. Unless the apex court declares the latest amendment ultra vires, the sanctity of the highest court – as an institution mandated by the constitution to act as a check on the abuse of power by the executive and the legislature – is likely to be diminished in the days to come.

Can the Supreme Court strike down the 2026 amendment?

The Supreme Court has enough basis to strike down the 2026 amendment to the MMDR Act. Yes, Entry 54 of the Union List allows the Union government to ‘impose limitations’ on the taxing power of the states, but the constitution did not envisage that it could completely obliterate the taxation rights of the states over the mine leaseholders. The Modi government has clearly exceeded its brief.

Further, Entry 49 of the State List empowers States to levy taxes on mineral bearing land and the Supreme Court judgment had ruled that the States’ power to tax any land, including the mineral-bearing land, was inalienable and there was no provision in the constitution allowing the Union government to take away this power. 

The apex court had made it crystal clear that the limiting clause of Entry 54 of the Union List did not extend to Entry 49 of the State List, and the Modi government ignored this clear enunciation and carried out amendments anyway. 

That’s a sound basis to declare the amended MMDR Act as unconstitutional.

Thus, Section 9D inserted in the latest amendment is an open-and-shut case for the Supreme Court to nullify the Act. After all, it’s an established principle of law that a legislature cannot override the Supreme Court’s decision by merely passing a legislation. It needs to cure the defect identified by the Court. 

Had the government moved a constitutional amendment altering the constitutional allocation of the legislative power under Entry 49 and 50 of the State List and Entry 54 of the Union List, then it could have overridden the top court’s ruling – though the power of judicial review would still wrest with the latter.

The fact that the Modi government did not seek to amend these entries and merely took recourse to amending the statutory law does not empower it to override the verdict of a constitutional bench. That is enough ground for the apex court to declare the legislation ultra vires.

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