Parliament passes Mines and Minerals Amendment Bill
The Bill will become law after it receives the President's assent
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Context
Parliament has passed the , which aims to limit the power of state governments to levy additional taxes on mineral rights and mineral-bearing lands. The Bill, which awaits the President's assent, has sparked controversy and protests from Opposition members who argue it undermines India's federal structure.
UPSC Perspectives
Polity
The central issue here is the balance of legislative power between the Union and the States, a core concept in federalism. The Constitution divides legislative subjects into three lists under the . While 'Regulation of mines and mineral development' is a State subject under Entry 23 of the , it is explicitly made subject to the provisions of List I (the ) with respect to regulation and development under the control of the Union. Entry 54 of the empowers the Union government to regulate mines and mineral development to the extent declared by Parliament to be expedient in the public interest. Furthermore, Entry 50 of the allows states to levy taxes on mineral rights, but this power is 'subject to any limitations imposed by Parliament by law relating to mineral development.' This Bill is a direct exercise of that Parliamentary limitation power. UPSC aspirants must understand this complex interplay: how a State's taxation power can be circumscribed by a Union law enacted in the 'public interest'. The opposition's claim that this violates federalism hinges on the argument that centralizing tax powers weakens the fiscal autonomy of mineral-rich states, a recurring theme in center-state relations.
Governance
From a governance perspective, this amendment touches upon fiscal federalism—the financial relations and distribution of resources between the center and the states. States often rely on revenues from their natural resources to fund development programs. When the Union government restricts their ability to levy taxes (like royalty or cess on minerals), it can significantly impact state budgets, especially for mineral-rich states like Odisha, Jharkhand, and Chhattisgarh. The stated intent behind such centralization is often to create a uniform regulatory and taxation framework across the country, preventing states from imposing arbitrary or exorbitant taxes that could deter investment or make minerals uncompetitive in global markets. This reflects the tension between ensuring a conducive national environment for business and maintaining the fiscal independence of states. The governance challenge is finding a mechanism for equitable revenue sharing that compensates states adequately while achieving national economic goals.
Economic
The economic implications of this Bill are profound for the mining sector and broader industrial development. The primary legislation governing this sector is the (MMDR Act). By restricting states' ability to impose additional taxes on mineral rights, the Union government aims to provide policy certainty and stabilize the cost of minerals. Minerals are crucial raw materials for key industries like steel, cement, and power generation. Excessive or unpredictable state-level taxation can lead to increased input costs for these industries, potentially driving up inflation and reducing the competitiveness of Indian manufacturing. The amendment can be seen as an effort to improve the Ease of Doing Business in the mining sector, encouraging domestic and foreign investment in exploration and extraction, which are vital for reducing India's reliance on mineral imports and achieving economic self-reliance.