Coal India, Its Subsidiaries and SAIL Get Major Relief as Parliament Passes New Mining Tax Law

In a landmark reform for India’s mining sector, Parliament has passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, bringing substantial relief to Coal India Limited (CIL), its subsidiaries, Steel Authority of India Limited (SAIL) and other mining companies by eliminating the uncertainty surrounding massive retrospective mineral tax liabilities while creating a more uniform fiscal framework for the industry.

The Rajya Sabha passed the Bill on Thursday, a day after it was approved by the Lok Sabha. Introduced by Union Coal and Mines Minister G. Kishan Reddy, the legislation significantly curtails the powers of State Governments to impose taxes, cess and other levies on mineral rights and mineral-bearing lands.

Major relief for mining PSUs

The amendment is expected to be a major financial relief for Coal India Limited, its subsidiaries—including Bharat Coking Coal Limited (BCCL), Central Coalfields Limited (CCL), Eastern Coalfields Limited (ECL), South Eastern Coalfields Limited (SECL), Mahanadi Coalfields Limited (MCL), Western Coalfields Limited (WCL) and Northern Coalfields Limited (NCL)—as well as SAIL, all of which had faced the prospect of substantial additional tax liabilities following the Supreme Court’s landmark judgment in 2024.

In July 2024, a nine-judge Constitution Bench of the Supreme Court ruled that States have the constitutional power to levy taxes on mineral rights and also permitted recovery of such taxes retrospectively from April 1, 2005. The judgment had exposed mining companies to potentially massive tax demands running into tens of thousands of crores of rupees.

The new amendment effectively neutralises that financial exposure by providing that taxes, cess or other levies imposed by States before the commencement of the amendment, but not already deposited or recovered, shall not be recoverable. However, amounts that have already been deposited with or recovered by State Governments will not be refunded.

For mining PSUs, this means significant relief from potential retrospective liabilities that could have impacted profitability, cash flows, capital expenditure and future investment plans.

Uniform taxation regime

A key feature of the amendment is the insertion of Section 9D, under which State Governments cannot impose taxes, cess or other levies on mineral rights or mineral-bearing lands based on mineral quantity, mineral value, royalty payable or similar parameters except in accordance with conditions or restrictions prescribed by the Central Government.

The Centre has argued that varying State-level taxes and levies had created uncertainty in the mining sector by leading to multiple charges, differing tax structures and retrospective demands.

According to the Government, the amendment aims to establish certainty, stability and predictability for mining companies, encourage investment and ensure a nationally consistent fiscal framework.

Jharkhand among the biggest losers

While the amendment is a major relief for mining companies, it is likely to prove a significant setback for mineral-rich States, particularly Jharkhand.

Following the Supreme Court’s 2024 judgment, Jharkhand had emerged as one of the States expected to benefit the most from the power to levy taxes on mineral rights. Industry estimates suggested that the State could potentially recover between ₹80,000 crore and ₹1.5 lakh crore in retrospective tax demands from coal, iron ore and other mineral producers.

With the new legislation invalidating all unpaid or unrecovered retrospective levies, much of that potential revenue may now become unrecoverable.

The amendment also restricts the State’s ability to independently impose future mineral-related taxes, making such levies subject to conditions prescribed by the Central Government.

Financial certainty for mining companies

The legislation is expected to strengthen the financial position of mining PSUs by:

• Eliminating uncertainty over large retrospective tax demands.
• Providing greater predictability for long-term investment and mine expansion.
• Reducing the risk of multiple State-level taxes increasing production costs.
• Improving financial planning and capital allocation.
• Potentially reducing prolonged litigation between mining companies and State Governments over mineral taxation.

Constitutional debate likely

The amendment is also expected to trigger fresh legal and constitutional debate. While the Supreme Court had recognised the States’ constitutional power to levy taxes on mineral rights, Parliament has now imposed statutory restrictions on the exercise of that power through amendments to the MMDR Act.

Several mineral-rich States may examine the constitutional validity of the new provisions, particularly those limiting their taxation powers and nullifying unrecovered retrospective claims.

A major policy shift

The MMDR Amendment, 2026 represents one of the most significant policy changes in India’s mining sector in recent years. While the Centre says the law will improve the ease of doing business by creating a stable and predictable taxation regime, States such as Jharkhand are expected to lose a major potential source of revenue.

For mining PSUs including Coal India and SAIL, however, the legislation removes one of the largest financial uncertainties created by the Supreme Court’s 2024 judgment, allowing them to focus on production, expansion and long-term investment without the overhang of massive retrospective mineral tax liabilities.