In a significant ruling on Thursday, the Supreme Court confirmed the authority of state governments to impose royalties on mineral-bearing lands, a decision that bolsters the financial autonomy of mineral-rich states such as Odisha, Jharkhand, West Bengal, Chhattisgarh, Madhya Pradesh, and Rajasthan.
The verdict, led by Chief Justice DY Chandrachud, was passed with a majority of 8:1, distinguishing between ‘royalty’ and ‘tax’. The Court clarified that royalty should be considered a contractual payment from a lessee to a lessor, rather than a tax imposed by the state. This interpretation upholds the states’ competence and power under the current legal framework to demand such payments.
Justice BV Nagarathna offered the lone dissenting voice in the verdict. She raised concerns that allowing states to levy royalties on mineral rights could foster “unhealthy competition” among states, potentially exploiting the national market and threatening the federal balance, particularly in the context of mineral development.
The majority opinion stressed that the Parliament does not possess the authority to tax mineral rights as outlined under Entry 50, List I of the Constitution. Furthermore, the verdict examined the Mines and Minerals (Development and Regulation) Act (MMDR), finding no provisions that restrict a state’s ability to tax minerals. The Court firmly stated, “We hold that both royalty and dead rent do not fulfill the ingredients of tax.”
Also Read
This ruling is a boon for states that are rich in minerals, providing them with the legal backing to capitalize on their natural resources through the imposition of royalties. This could lead to increased revenue for these states, which can be directed towards development projects and improving local infrastructure.
