Supreme Court Upholds Mining Royalty Calculation Formula: Fiscal Policy and Constitutional Validity

Hindustan Times - India · 15 Jul 2026 · 2 min read
Prelims · Polity Mains · GS2 Polity and constitution High relevance

The Supreme Court upheld the Centre's methodology for calculating mining royalty, ruling it as a valid fiscal policy measure to prevent tax evasion and under-invoicing, ensuring stability in the mining sector.

Key points

Supreme Court upheld the constitutional validity of the mining royalty calculation formula under Rule 38 of the Minerals Concession Rules, 2016 and Rule 45(8)(a) of the Mineral Conservation and Development Rules, 2017.

Royalty Calculation includes contributions to the District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) in the sale value, which petitioners argued leads to 'royalty on royalty'.

Judicial Restraint was emphasized by the bench, stating that legislatures enjoy wide discretion in fiscal and economic policy matters, including royalty computation.

Article 14 and 19(1)(g) challenges were rejected, with the Court ruling that the methodology is neither arbitrary nor unconstitutional, as it aims to curb price manipulation.

Economic Impact of altering the formula could have reduced state revenues by 15-17%, affecting 585 auctioned mineral blocks and causing losses of several lakh crore rupees.

District Mineral Foundation (DMF) and NMET are critical for local area development and mineral exploration, funded through royalty contributions, as upheld by the Court.

[GS3-Economy] The ruling stabilizes the mining sector, ensuring consistent revenue streams for states and the Centre, crucial for infrastructure and development projects.

Way Forward: States should enhance transparency in royalty collection and utilization, invest DMF funds in sustainable local development, and adopt technology to prevent mineral price manipulation.

Key terms

District Mineral Foundation (DMF)

A statutory body established under the Mines and Minerals (Development and Regulation) Amendment Act, 2015, to work for the interest and benefit of persons affected by mining-related operations. It is funded by contributions from miners and plays a pivotal role in local area development.

National Mineral Exploration Trust (NMET)

A trust set up under the MMDR Act, 1957, to promote regional and detailed mineral exploration. It is funded by a portion of the royalty paid by mining leaseholders and aims to bridge the gap in exploration funding.

Royalty on Minerals

A payment made by mining leaseholders to the government for the right to extract minerals. It is a significant source of revenue for states and is calculated based on the average sale price of minerals, as upheld by the Supreme Court.

Article 14 and 19(1)(g)

Article 14 guarantees equality before the law, while Article 19(1)(g) provides the right to practice any profession or carry on any occupation, trade, or business. The Court ruled that the royalty calculation methodology does not violate these constitutional provisions.