The Supreme Court on Wednesday rejected a plea for restricting its June 25 ruling, affirming the legislative power of state government to tax mineral rights and mineral-bearing lands in addition to royalty for prospective effect, and allowed them to seek dues of these levies from “mining firms and the Centre” from April 1, 2005. In an 8:1 ruling, a Constitution bench headed by Chief Justice DY Chandrachud said the recovery of these dues, based on past demands, shall be staggered over 12 years commencing from April 1, 2026, sans penalty and interest.
The verdict will have a very large financial impact on the country’s mining firms, as arrears may work out to be more than `1.5-2 lakh crore, industry players said on Wednesday. The past tax demands, if states wish to press them, are expected to be substantial for the sector as a whole, although the impact could vary widely among firms.
While individual companies said they were estimating the extent of the impact, the Federation of Indian Mineral Industries (FIMI) said the arrears could be in the region of up to `2 lakh crore. In its arguments before the apex court opposing the demand of states for refund of royalty levied on mines and minerals since 1989, the Centre had said it would impact “the citizens and the PSUs” to the tune of `70,000 crore, according to initial estimates.

According to analysts, the ruling would have an immense implication for the mining industry, their consumers across the different economic value chains and the economy as a whole. A possible rise in prices of minerals, ranging from coal, iron ore and bauxite to deep-seated base metals, could trigger an inflationary spiral across user industries, including white goods, automobiles and electronics.
Among the mineral-rich states, BJP-ruled Odisha, Madhya Pradesh, Rajasthan and Chattisgarh may not seek to recover the levies with retrospective effect, but Opposition-run Karnataka, Tamil Nadu, Jharkhand and West Bengal might want to bolster their coffers by renewing their past demands.
Stating that the verdict is a “cause for worry”, Satish Pai, managing director at Hindalco, said, “While we are not worried about the retrospective part of the tax — we really don’t have an exposure — but on a prospective basis, we do hope that between the state and the central governments, the industry does not get burdened with too much taxation.”
Amitava Mukherjee, chairman and managing director at state-run NMDC, said, “We are evaluating to what extent it would be affecting us. To comment in detail, we are assessing both short- and long-term implications.”
After the June 25 ruling, TV Narendran, CEO & MD, Tata Steel had told a TV channel that on an ongoing basis, the impact on the firm could be around `1,500 crore a year. “Contingent liability is something that has been in our books for the last many years. It’s not anything fresh,” he said, indicating these impacts had been provided for.
A Vedanta spokesperson said, “We can confirm that we have no material demands raised upon any of our businesses at this time… If and when any such demands are raised, Vedanta will consider all regulatory and legal remedial measures on a case-to-case basis.”
State-owned Coal India also said that “it is going through the order and will assess the probable financial impact thereof and disclose the same in the near future”.
Analysts said the development is likely to elevate production costs of minerals affecting miners’ profitability and future investments. “The specifics of these taxes, once clarified, will undoubtedly lead to increased mining costs and, consequently, higher metal costs, potentially triggering broader inflationary trends,” said Rakesh Surana, partner with Deloitte India.
Amit Maheshwari, tax partner at AKM Global, said that if states apply this ruling retrospectively, it could lead to significant financial liabilities for companies, potentially “reaching tens of thousands of crores”.
Analysts are of the view that the move will hit the steel sector and the companies harder as the ability of these companies to pass on the rising costs to the end users will depend on the strength of the metal cycle. “At present, domestic steel prices are very close to the cost of Chinese imports. Any further increase could exacerbate the threat of imports,” S&P Global said.
As per the agency’s estimates, a 15% tax on iron ore, if applied uniformly across states, could increase the per tonne cost of steel by `1,500 ($17.8), all else being equal. An inability to pass on this cost could slow deleveraging and hinder the steel sector’s growth plans. S&P Global sees the aggregate debt for leading steel producers increasing to multi-year peak levels under a stress scenario.
“If India-based steel companies can’t pass on higher inputs due to higher mineral taxes, this would add further downside pressure on relatively weaker credit metrics across the sector,” said Anshuman Bharati, credit analyst at S&P Global Ratings.
“Apart from the direct monetary hit, the companies will have to deal with the reaction of the market as stocks of most mining companies such as Coal India, Hindustan Zinc, etc, saw a slump, noted Jitendra Motwani, partner at Economic Laws Practice. “Since few states were supporting prospective application of the levy, it will be interesting to see if the Centre comes up with any amendments to law to rationalize the impact of the said decision,” he said.
FE had earlier reported that the Centre is considering promulgating an Ordinance to ensure that the recent Supreme Court judgment upholding the state governments’ power to tax mineral rights and mineral-bearing lands will be effective only prospectively. But since the matter involves the Constitution, the process may not be easy.
“Retrospective effect of the order could lead to a financial emergency because many sectors that are dependent on minerals will be severely impacted. Given this scenario, the government may be compelled to issue an executive order to make relevant changes in the law to make it prospective,” an official had earlier told FE.
S&P Global also noted that the retrospective application of the ruling could lead to disputes and litigation as mining companies grapple with additional tax liabilities. The increased tax burden and regulatory uncertainty will weaken the credit metrics of the miners.
Some mineral-rich states may also opt to bring in new taxes. However, the reduced mining volumes and value addition which investor apathy could create could offset the revenue gains.
Already, there is a high incidence of tax in the mining sector – states’ royalty revenue from mining surged 300% between FY17 and FY22. Coupled with high bid premiums, the taxes already jack up the costs to as high as the initial sales values of the resources. Upfront revenues from auction and imports, including royalties and the district mineral fund levy, could hit the long-term commercial viability of the ventures.
As per data provided by the government, Odisha’s earnings have grown by 860% from 2015-16 to 2022-23, post rationalization of royalty rates. In these 8 years, Chhattisgarh’s earnings have increased by 620%, Jharkhand’s by 425% and Karnataka’s by 316%.

Mining firms stare at huge Rs 2-lakh-cr hit