Introduction
Mineral-producing States generate raw materials, energy and public revenue for national development, but bear concentrated costs of displacement, pollution, deforestation and infrastructure pressure. A balanced fiscal regime must combine stable investment rules with compensation based on extraction-related burdens.
Suggested Mineral Fiscal Framework
Predictable Investment Regime
- Adopt a transparent, rule-based system for royalties, auction premiums and statutory contributions.
- Revise royalty rates periodically through a predetermined formula linked to mineral prices and profitability.
- Avoid retrospective levies and overlapping Union–State charges.
- Provide time-bound clearances, stable lease conditions and an independent dispute-resolution mechanism.
Equitable Revenue Sharing
- Divide mineral revenues among the Union, producing States and mining-affected local bodies through a statutory formula.
- Assign greater weight to extraction intensity, ecological damage, tribal population, displacement and infrastructure burden.
- Provide producing States a guaranteed minimum share while creating an equalisation component for non-mineral States.
- Ring-fence part of the revenue for intergenerational savings, recognising that minerals are exhaustible assets.
Community and Environmental Compensation
- Strengthen District Mineral Foundations (DMFs) through Gram Sabha participation, public disclosure and social audits.
- Prioritise drinking water, healthcare, nutrition, education, livelihood restoration and rehabilitation.
- Create an environmental restoration fund based on the polluter-pays principle.
- Require mine-closure bonds to prevent abandoned ecological liabilities from falling upon States.
Cooperative Federalism
- Establish a Mineral Fiscal Council comprising the Union, producing States and local representatives.
- Entrust it with recommending royalty revisions, harmonising levies and resolving fiscal disputes.
- Maintain a shared digital platform containing production, revenue and environmental-compliance data.
- Provide transition grants to districts affected by mine depletion, closure or decarbonisation.
Conclusion
Minerals may be national economic assets, but their adverse consequences are predominantly local. Predictable taxation, burden-sensitive devolution and community-controlled compensation can promote investment while ensuring distributive justice and genuine cooperative federalism.
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