Centre proposes parity in mineral taxation, states' rights to remain protected

According to a Hindustan Times report, the Central government is attempting to bring more parity in mineral taxation and production costs across various states through proposed amendments to the Mines and Minerals (Development and Regulation) Act, or MMDR Act, while ensuring that the states' rights to levy taxes and cess remain intact. Senior IAS officer and Union Mining Secretary V.L. Kantha Rao (Keshav Chandra) stated this while addressing the Conference of Mining Ministers on reforms in the mining and coal sector held in Panaji, South Goa.

Union Minister of Mines G. Kishan Reddy, Goa Chief Minister Pramod Sawant, and Minister of State for Mines Satish Chandra Dubey were also present at the meeting. Keshav Chandra stated that the country needs to strengthen its domestic capacity for the exploration, processing, and manufacturing of products derived from critical minerals to avoid dependency on imports and the resulting disadvantages in the global economy. He added that the availability of critical minerals such as lithium, nickel, and rare earth elements is essential for the production of batteries and permanent magnets.

Stating that significant steps are being taken towards self-reliance, he said that the government is providing massive subsidies to industries coming forward to set up lithium and nickel processing facilities. In addition, to promote the recycling of electronic waste and black mass, the government has launched a scheme with a financial provision of ₹1,500 crore. Under this scheme, approximately 58 recycling units have been registered, which have promised a combined processing capacity of 850 KTPA against an initial estimate of 270 KTPA. The Mining Secretary expressed confidence that within the next three to four years, India will be capable of producing sufficient critical minerals and other essential materials to manufacture batteries and permanent magnets.

Explaining the rationale behind the proposed amendments to the MMDR Act, he clarified that a large disparity in mineral production costs and taxation between neighboring states can adversely affect industries and induce the migration of economic activities towards states with favorable conditions. Citing the example of bauxite, he said that this situation could create supply-related challenges and encourage imports despite the availability of minerals in the country. There should be an economic rationale in levying specific cess and taxes on all minerals, and uniformity in this is essential.

The Mining Secretary emphasized that the proposed amendments would not infringe upon the rights of the states, and they would retain the authority to collect taxes and cess. States receive 92 to 93 percent of the revenue generated from mining activities, while the Centre does not receive any major revenue other than GST, and even that GST is returned to the states. Approximately three percent of the revenue related to royalties is spent on exploration activities. Emphasizing the importance of cooperative federalism, he stated that the Central government respects the rights of the states while also understanding the need to ensure economic development and competitiveness in the mining sector. He called upon the states to adopt a comprehensive and understanding approach towards mining policies and to create a rational tax structure for industrial development.