SC Upholds State Rights: Mineral-Rich States to Collect Royalty Dues from 2005

The Supreme Court granted mineral-rich states the authority to collect past dues on royalties from mining companies, effective April 1, 2005. These payments will be spread out over 12 years, offering a structured approach to the collection.

The bench, however, made it clear that states are not permitted to impose any penalties on these payments. This decision comes after the Centre opposed the states’ demand for a refund of royalties on mines and minerals dating back to 1989, arguing that such a move could drain public sector coffers by an estimated ₹70,000 crore, affecting citizens.

Chief Justice DY Chandrachud announced that the landmark verdict would be signed by eight bench judges, who, by the majority, upheld the state’s power to levy taxes on mineral rights. However, Justice BV Nagarathna, who had previously dissented in the July 25 verdict, will not be signing Wednesday’s ruling.

Last month, the Supreme Court reaffirmed state governments’ right to levy royalties on mineral-bearing land, distinguishing ‘royalty’ from ‘tax.’ The 8:1 verdict led by CJI Chandrachud is set to benefit states like Odisha, Jharkhand, Bengal, Chhattisgarh, Madhya Pradesh, and Rajasthan, enabling them to impose additional levies on mining companies within their jurisdictions.