5 min readAug 27, 2026 06:20 AM IST First published on: Aug 27, 2026 at 06:20 AM ISTIn the 1950s, B C Roy made a trip to Poland to talk to coal-mining companies about bringing their technologies to India. As Chief Minister of West Bengal in a newly independent India, he had an economic vision for his state that relied on coal-based industrialisation; his vision was somewhat divergent from the Planning Commission’s goals at the time. He could afford to think this way because the coal industry had not been nationalised, state governments could still make major claims on major minerals within their boundaries, and the model of industrialisation during that era relied on these natural resources.No chief minister in India can have similar ambitions today. The Mines and Minerals (Development and Regulation) Act, 1957 (MMDR) and its amendments have progressively dispossessed state governments of the right to exploit major minerals within their boundaries. These rights now lie with the Union government, but in return there has been an uneasy federal compromise around minerals for the last half-century: The Union would allocate mining rights for major minerals, states would be allowed to tax these minerals or the underlying land at some kind of periodically renegotiated rate.AdvertisementWith the recent passing of the MMDR Amendment Act, 2026 in both houses of Parliament, any vestiges of this compromise are lost now; it gives the central government control over all mineral and mineral land taxation. Effectively, it is a declaration of war on fiscal federalism writ large, and a potentially unconstitutional evasion of the 2024 Supreme Court ruling around states’ rights over mineral taxation. The Act turns what was once a fiscal right of states into a discretionary allocation that can be altered by central rules at any point. For states with large mining economies, this could affect anywhere between 10 and 20 per cent of their annual revenues. Ironically, the states most affected by this at the moment are currently politically aligned with the Union; one wonders how state finance ministers feel about this potential cut to their budgets.Many MPs had asked for the Bill to be referred to a standing committee. Instead, the MMDR amendments have become the latest case of fiscal myopia and corporate lobbying short-circuiting necessary parliamentary deliberation. Despite its fiscal implications over the coming years, it was discussed for a princely total of five minutes in the Lok Sabha and 40 minutes in the Rajya Sabha. Given mounting dissatisfaction with the law, the Union government has now deployed bureaucrats and technocrats (instead of politicians) to defend it.Perhaps there is an imaginary world where state governments are the entire problem, that ease of doing business is hobbled by them only, that the kleptocracy and fiscal profligacy of the periphery can only be reined in by the righteous fiscal discipline of the core. That certainly seems to be the current narrative. However, this does not explain why after having Union government control over multiple states, sometimes for decades, mining still evades ease of doing business.AdvertisementPart of the answer to this lies in how localised mining, its impacts and its induced economies are. Because of the density of approvals, regulations and negotiations, only a few large companies in India have been able to navigate the ecosystem at scale. Mining is both essential to industrial and energy policy in India and socially and environmentally devastating. It requires delicate negotiation and repeated interaction for local communities and politicians to have any faith in mining companies; our public-sector mining companies have been much better at this than private miners. Mining should never be too easy; companies need to earn the social and political right to mine, not simply pay for a licence or lease and proceed how they want.you may likeAs this law manifests the unending fiscal hunger of the Union government, there’s a lesson to be learned from how China managed its fiscal transition. In 1994, Beijing dramatically centralised its fiscal management by keeping a much larger share of overall taxes. However, it opened an escape valve by trusting provinces to financially innovate through other instruments; this included direct, unmediated access to capital markets. Such policy was crucial to the development of regional models of growth in China’s provinces. India has kept all of these escape valves closed for now and its fiscal policies are steadily increasing pressures on states. Perhaps it’s time to open them before overbearing fiscal dominance causes an explosion.The writer is assistant professor, School of Public Policy, IIT-Delhi