India passes bill to cap state mining taxes

India’s Parliament has passed a bill to cap taxes levied by state governments on mining activities, seeking to curb excessive levies that have weighed on the sector’s competitiveness.

The Mines and Minerals (Development and Regulation) Amendment Bill, 2024, sets a 10% ceiling on royalties for major minerals and 5% for minor minerals, according to the text approved by lawmakers. State governments currently impose varying rates, often exceeding these thresholds, which industry groups argue have deterred investment and inflated operational costs.

The legislation also introduces a uniform auction process for mineral concessions, replacing discretionary allocation methods used by some states. The reforms aim to align India’s mining regulatory framework with global standards and attract foreign direct investment, the government said in a statement.

Mining industry executives welcomed the move, noting that high and inconsistent state taxes have eroded profit margins for operators. "The cap provides much-needed clarity and will help stabilize the cost structure," said a spokesperson for the Federation of Indian Mineral Industries. The bill now awaits presidential assent to become law, a procedural step expected in the coming weeks.

The changes follow years of industry lobbying for tax uniformity and reduced regulatory uncertainty. Analysts say the reforms could boost production of key minerals such as coal, iron ore, and bauxite, though enforcement and state compliance remain critical factors.

The government has not specified a timeline for implementing the new tax limits, but officials indicated that states would be given six months to align their policies with the federal cap.