Defend the Centre or defend Odisha. BJP’s Rs 12,000-crore dilemma

The letter reveals the crux of the controversy for states like Odisha, whose economy and politics are deeply intertwined with mining. In August, Parliament passed the Mines and Minerals (Development and Regulation) Amendment Act, 2026, to set a uniform national tax framework for major minerals and limit state powers to levy taxes on mining lands.

In August, Parliament passed the Mines and Minerals (Development and Regulation) Amendment Act, 2026, to set a uniform national tax framework for major minerals and limit state powers to levy taxes on mining lands.

In doing so, the 2026 amendment overrides the key financial impacts of a 2024 Supreme Court ruling, which allowed mining states the exclusive power to tax mineral rights and mineral-bearing lands. For mining states like Odisha, the law brings forth a dilemma: how to reconcile the financial and political implications of a law widely viewed as detrimental to its interests.

The law has since become a political flashpoint in the state. While the ruling Bharatiya Janata Party, the outfit that leads the National Democratic Alliance government at the Centre, has been defending the law by arguing that arbitrary and multi-level levies on mineral-bearing land would cause extensive damage to the state’s industrial ecosystem, the Opposition has been trying to corner the state, framing it as an attack on federalism and the state’s financial rights. While the BJD alleges that the new law could cost the state Rs 12,000 crore in annual losses and Rs 1 lakh crore in arrears, the Congress and the Left plan to gherao the Odisha Assembly on September 29.

“Through the MMDR Amendment Act, the Centre has permanently taken away the rights of the state governments over mines and mineral-bearing land,” BJD Rajya Sabha member Santrupt Misra told The Indian Express. “Taking away the rights of the states is an attack on the federal structure of the country.”

The law has since become a political flashpoint in the state.

However, Odisha’s Steel and Mines Minister Bibhuti Jena dismissed these concerns, accusing the Opposition of “misleading people”.

“Odisha’s earnings from the mining sector have witnessed a significant jump after the Narendra Modi government last amended the MMDR Act in 2015. The state was earning around Rs 5,000 crore before 2014, which has risen to Rs 50,000 crore. Besides, the states are also getting funds under the District Mineral Foundation (DMF), a non-profit trust set up by state governments for mining-related operations,” Jena said.

The Act and the row

The Mines and Minerals (Development and Regulation) Act, 1957 is India’s principal law governing the development and regulation of mines and minerals. Enacted by Parliament in 1957, it declares that the Union should take control of mining and mineral development to the extent provided by the Act.

Although the law has seen some significant amendments since it was introduced – including considerable relaxation to the regulatory framework – one of the biggest changes in recent times was in 2015, when allocation of major mineral concessions was moved to competitive auctions. This amendment also created the District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) and strengthened penalties for illegal mining. The years 2021 and 2023 saw structural reforms and significant changes concerning critical minerals.

However, Odisha’s Steel and Mines Minister Bibhuti Jena dismissed these concerns, accusing the Opposition of “misleading people”.

In July 2024, a 9-judge Constitution Bench headed by Chief Justice of India D Y Chandrachud, in an 8-1 majority, upheld the power of the states to levy royalty on extraction of minerals from their land and said they can also tax the lands which comprise mines and quarries. The court, in a follow-up order, also allowed states to collect tax arrears from April 1, 2005, but without any interest or penalty.

Although there are no official records, the BJD claims that the ruling could have brought Odisha Rs 1 lakh crore in arrears alone. “The order had also cleared the way for the state to receive an additional Rs 12,000 crore annually as revenue, which the state will lose,” BJD MP Misra said.

On August 13, Parliament passed the Mines and Minerals (Development and Regulation) Act, 2026, reigniting a long-running tussle between the Centre and states over taxing mineral resources.

What has caused unease among mining states, including Odisha, is a new clause, Section 9D, which prohibits states from levying any tax.

“No tax, cess or such other levy (by whatever name called) shall be imposed by the State Government on— (a) mineral rights; or (b) mineral-bearing lands, either based on mineral quantity or mineral value or royalty payable or otherwise, except in accordance with such conditions or restrictions as may be prescribed by the Central Government,” read the clause.

In addition, an amendment of Section 2 also expands the Centre’s control to include mineral-bearing lands alongside regulation of mines, while Section 13 grants the Centre sole authority to frame rules restricting states’ power to tax on minerals.

Why mining matters for Odisha

Odisha’s vast mineral reserves mean that the Mines and Minerals (Development and Regulation) Act — and any amendments to it – will have a direct and material impact on the state.

Odisha has 28% of India’s iron ore, 24% of coal, 59% of bauxite and 98% of chromite, making it a preferred investment destination for mineral-based industries like steel, aluminium refineries and smelters, and ferro-chrome units.

The Mines and Minerals (Development and Regulation) Act, 1957 is India’s principal law governing the development and regulation of mines and minerals. Enacted by Parliament in 1957, it declares that the Union should take control of mining and mineral development to the extent provided by the Act.

The mining and quarrying sector contributes about 23.1% of the state’s industrial gross value addition (GVA), valued at Rs 0.8 lakh crore in the latest Odisha Economic Survey released in February. The sector’s contribution to Odisha’s Gross State Value Added (GSVA) is 9.5%.

Mining royalties make up 79.1% of Odisha’s Rs 60,000 crore of non-tax revenue during 2025-26, the survey report showed.

The southern districts of Koraput, Rayagada and Kalahandi are rich in bauxite deposits, with Navratna PSU Nalco and Vedanta having their refineries in the region.

Joda in Keonjhar and Koida in Sundargarh have rich deposits of iron ore and manganese, with several of India’s big steel players having their own mines there. Similarly, coal reserves in Talcher in Angul district and the Ib Valley in Sundargarh district have meant that central PSUs such as Mahanadi Coalfields Limited have their operations there.

In 2025-26, Odisha produced over 150 million tonnes of iron ore, with state-owned oil marketing companies contributing a record 40 million to the state’s total output. Similarly, over 218 million tonnes of coal were produced in Odisha during the last fiscal.

Since states cannot directly levy taxes on mining lease-holders, they currently get a fixed royalty from the Centre. According to official figures from Odisha’s steel and mines department, the state’s total earnings from the mining sector were Rs 13,918 crore in 2020-21, Rs 49,859 crore in 2021-22, Rs 38,075 crore in 2022-23, Rs 46,339 crore in 2023-24, Rs 42,066 crore in 2024-25, and Rs 46,710 crore in 2025-26 and Rs 53,000 crore for 2026-27.

The Supreme Court’s July 2024 order was a significant ruling for the state, a retired bureaucrat said.

“Had the Centre not subsequently brought the MMDR Act, states like Odisha would have earned a significant windfall from the mining sector, which the state could have spent on building infrastructure and on the social sector,” the former official said.

While states such as Odisha hesitated, others such as Jharkhand moved in to collect their dues, passing the Jharkhand Mineral Bearing Land Cess Act, 2024. “Odisha made no move to collect this revenue in the last two years,” one official said.

Odisha’s attempt to levy tax on mineral-bearing lands dates back to 2004, when the then Naveen Patnaik government enacted the Orissa Rural Infrastructure and Socio-Economic Development (ORISED) Act. The law empowered the state government to charge up to 20 percent of the annual value of land that holds minerals on leaseholders.

Several BJP leaders, then in alliance with Patnaik’s BJD, had backed the law. Among them were Chief Minister Mohan Charan Majhi, then an MLA from the major mining district of Keonjhar.

In December 2005, the Odisha High Court struck down the law, leading the state government to appeal in the Supreme Court. That case is still pending.

Political slugfest

Given the state’s vast mineral reserves, mining lobbies play a significant role in Odisha politics – data released by the Election Commission of India in March 2024 showed that mining and infrastructure companies heavily funded major political parties through electoral bonds, including both the ruling BJP and the Opposition BJD.

For mining companies, the law means they would continue operating at the taxes fixed by the Centre and paying royalty to the states – a development that could potentially save them crores.

Three Congress-ruled states — Karnataka, Kerala, and Telangana – have challenged the law in the Supreme Court.

In Odisha, however, the legislation has become a major political flashpoint, with the Opposition gunning for both the Centre and the Majhi government. The Opposition claims that the law means that the Centre has permanently taken away state governments’ rights over mines and mineral-bearing land.

“This is an attack on the federal structure of the country,” BJD’s Santrupt Misra, a former corporate leader who joined the party in 2024, said.

The BJD points to an affidavit filed by Odisha’s Advocate General, Pitambar Acharya, before the Supreme Court on July 31, 2024, stressing the importance of protecting states’ financial interests and pressing the court to allow states to collect taxes on mineral-bearing lands retrospectively from April 1, 2005.

“The question now is whether that affidavit was incorrect, or if BJP leaders are lying to defend their own position,” Misra asked.

Meanwhile, Opposition parties such as the Congress have threatened an economic blockade and a statewide shutdown.

Odisha Congress president Bhakta Charan Das called the amendment anti-Odisha. “We are exploring legal options and consulting lawyers to challenge the law in the Supreme Court,” he said.

But the BJP has denied the allegations, with leaders from both the Centre and the state arguing it was “in the interest of the country”.

“Imposing arbitrary and multi-level levies would have forced key mining operations and manufacturing units in mineral-bearing districts to shut down, threatening the livelihoods of lakhs of our youth,” Dharmendra Pradhan, a former union minister and an MP from Sambalpur, said in a video message on August 29. “Besides, unchecked levies directly escalate input costs for steel, cement, power, and coal. This tax burden would ultimately fall on the common middle-class families of Odisha, raising the cost of building a house, electricity tariffs, and essential goods.”

At the same time, Pradhan also criticised former chief minister Naveen Patnaik for not bringing legislation to remedy the legal flaws in the ORISED Act during the years it was in power.

“BJP MPs from Odisha voted in support of the Bill for the larger interests of the state and its people, especially the youth,” he said.

To counter the Opposition narrative, the BJP’s Odisha unit is believed to have passed a resolution against the Opposition “for misleading the people on the MMDR Act”.

Retired political science professor Jayant Mohapatra says the Odisha BJP’s current dilemma represents an age-old predicament for any national party in power at both the Centre and the state – how to balance the interests of the state while keeping the central leadership happy.

“In such situations, the state leadership is always at a crossroads for certain decisions that the Centre claims are in the national interest but which may not necessarily serve the state interests,” Mohapatra, a former vice-chancellor and political science professor at Berhampur University, says. In such cases, regional parties such as the BJD are better placed, he says.

At the same time, he cautions against overstating the impact of the issue on public perception. “The issue is very technical, and is one that common people fail to understand. It needs to be seen how the Opposition — the BJD, the Congress and the Left – help it gain momentum.”