Natural Resource Sharing in Federal Set Ups

Mr Sanjay Prasad 

Former Special Secretary, Ministry of Finance, Government of India

Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026 on 13 August 2026 and the Amendment Act was notified on 17 August 2026. The reform responds directly to the constitutional position clarified by the Supreme Court in Mineral Area Development Authority v. Steel Authority of India (2024).  The 2026 amendment introduces a new Section 9D which restricts State taxation of mineral rights and mineral-bearing lands, permitting such levies only subject to conditions or restrictions prescribed by the Union. It also invalidates specified unpaid or unrecovered pre-commencement State levies, while amounts already deposited or recovered are not refundable. The reform is therefore not merely a mining-policy amendment: it is a significant new episode in Centre–State fiscal federalism.

The Union Government's stated objective is to create a predictable and uniform fiscal framework for major minerals. It argues that States already receive the overwhelming share of mining-sector revenue—around 90 percent according to the Ministry of Mines—and that the 2026 reform does not disturb royalty, auction premium, DMF, GST or other existing revenue streams, nor State powers over minor minerals. The fiscal-federalism question, however, is sharper than the question of the aggregate share: the amendment changes the balance of fiscal powers shortly after the Supreme Court had affirmed the relevant State taxing field. The legal scrutiny therefore merit close attention.

Based on these facts, the article written by Mr Sanjay Prasad, (former Special Secretary, Ministry of Finance, Government of India), titled “Natural Resource Sharing in Federal Set Ups” analyzes the tensions between the Union and the State Governments on the legal, administrative and constitutional fronts, when it comes to sharing of natural resources like minerals. Recent court rulings and new laws have tended to create friction between the Central and the State Governments on financial issues. The author, in this article, attempts to find a balance between the two, so that Central Government has resources for its big projects, while the State Governments too, do not lose out on the monetary aspects for their budgetary needs.

The details of the Article will be available soon in “Our Publications” section.

(These are the personal views of the author. They do not necessarily reflect the opinion of OP Jindal Global University or its affiliated institutions).