MMDR amendment sparks revenue fears, Odisha may lose over ₹1 trn dues

According to industry and state-level estimates, the state stands to lose around Rs 12,000 crore in annual mineral-related revenue and could be deprived of outstanding dues estimated at over Rs 1 trillion.

While the Union government has defended the move as an effort to bring uniformity and predictability to mineral taxation, arguing that differing state-level levies can increase the cost of mining, discourage investment and affect mineral production, mineral-rich states, including Odisha, which was supposed to receive around Rs 12,000 crore annually through the tax on mineral-bearing land following the Supreme Court's 2024 ruling, would lose the revenue.

The Supreme Court, in its subsequent judgment on August 14, 2024, permitted states to raise demands for mineral-related taxes retrospectively from April 1, 2005, while allowing the payments to be staggered over 12 years from April 1, 2026. The ruling was expected to provide a substantial financial windfall to mineral-producing states. Industry estimates put the total arrears across states at around Rs 1.5 trillion to Rs 2 trillion, while Odisha alone was reported to be in line to recover more than Rs 1 trillion.

According to Odisha's Steel and Mines Department, the state has granted around 600 mining leases spanning nearly 100,000 hectares, with around 130 to 140 of those leases actively operating at any given time. Of the total 101 auctioned mineral blocks since the launch of the transparent auction regime in 2015, Odisha has recorded the highest number, with 34 blocks currently in production, followed by Karnataka with 18 and Gujarat with 11 operational blocks.

Days after the SC ruling in July 2024, Tata Steel, in its July 31, 2024, exchange filings, disclosed that it could owe around Rs 17,347 crore in retrospective mineral taxes to Odisha, though it later filed a curative petition in the Supreme Court seeking reconsideration of its ruling on the imposition of tax on mineral-bearing land.

"Nearly a quarter of the state's revenue comes from mineral resources. After the SC's 2024 ruling, Jharkhand collected revenue from the miners, but Odisha failed to collect it. The amendment is a huge setback for the state, which largely depends on mineral revenue for infrastructure development and welfare measures," said Amarendra Das, an associate professor of economics.

The Opposition Biju Janata Dal (BJD) claimed that the state stands to lose around Rs 12,000 crore in annual mineral-related revenue, besides the outstanding dues estimated at over Rs 1 trillion. Describing it as an attempt against the interests of states like Odisha, former minister Ranendra Pratap Swain alleged that the Bill primarily benefits large mining companies.

Bhrugu Baxipatra, senior general secretary of the BJD, argued that restricting the state’s ability to impose or recover mineral-related levies would effectively weaken its fiscal capacity at a time when Odisha bears much of the environmental, social and infrastructural burden associated with large-scale mining.

"The Union government has passed this Bill in Parliament for partisan interests. Despite the Supreme Court having ruled that the states have the right to collect revenue from the mining sector, the Central government is disregarding the judgment and taking away our rights," he said.

Steel and Mines Minister Bibhuti Bhusan Jena had earlier informed the state Assembly that Odisha would have to wait for the collection of dues as a petition seeking to reinstate the Orissa Rural Infrastructure and Socio-Economic Development (ORISED) Act, 2004, is pending in the apex court.

The Orissa High Court had struck down the ORISED Act, 2004, and ORISED Rules, 2005, on December 5, 2005, following which the state government had filed a civil appeal in the Supreme Court in March 2006. The state can collect tax up to 20 per cent of the annual value of the mineral-bearing land under the ORISED Act.

"It is not possible to collect tax pending since 2005 as the Act has not been reinstated,” the minister had told the Assembly in September 2024.

For Odisha, the stakes are particularly high because the state was expecting a substantial inflow from the Supreme Court-backed recovery of past dues. Prabodh Mohanty, president of the Utkal Chamber of Commerce and Industry, said the civil appeal is still pending in the SC.

"However, the dues stand lapsed according to the MMDR (Amendment) Bill, 2026. Besides, the states will have to take the prior permission of the Centre if they want to levy any tax on mineral-bearing land. This has been done to maintain uniformity in taxation," he told Business Standard.

Odisha's own revenue is estimated at Rs 1.41 trillion for 2026-27, including Rs 70,000 crore of own tax revenue and Rs 71,000 crore of non-tax revenue. Mining royalties and auctions contribute an estimated Rs 50,000 crore to Rs 55,000 crore to non-tax revenue annually, which is around 35-40 per cent of the state's total own revenue. With the Central transfer of around Rs 1.07 trillion, the total revenue receipt stands at Rs 2.48 trillion. However, mining proceeds contribute around 21 per cent to the overall state revenue pool.