Why the 2026 MMDR amendment could shape the State’s next economic cycle — from mines and transport to steel, manufacturing and tribal livelihoods

THEBUSINESSBYTES BUREAU

BHUBANESWAR, AUGUST 31, 2026

In Odisha’s mineral belt, the economics of a mine rarely ends at the mine gate.

A truck bought on bank finance in Keonjhar, a tyre shop in Joda, a roadside eatery along the Joda–Bamebari road, a contract worker’s monthly wage and a steel plant’s raw-material bill are all part of the same economic chain. When mineral production expands, the benefits travel outward. When a mine becomes unviable, the shock travels in the opposite direction.

That is why the debate over the 2026 amendment to the Mines and Minerals (Development and Regulation) Act, particularly the proposed national framework under Section 9D, has implications that extend well beyond the question of taxation.

At its heart is a deceptively simple question: should Odisha seek to maximise the levy collected from every tonne of mineral today, or maximise the economic value generated from its mineral endowment over the next 25 years?

The distinction matters for a State whose mineral revenue has risen sharply — from roughly ₹5,000 crore in 2014 to around ₹50,000 crore now — following mining-sector reforms and transparent auctions. The amendment, according to the case advanced in the accompanying analysis, does not dismantle this revenue architecture. Royalty, auction premium, District Mineral Foundation (DMF) contributions and the National Mineral Exploration Trust (NMET) contribution remain intact.

For iron ore, the 15% royalty remains untouched and accrues to the State, while auction premium and DMF continue. Around 90% of overall mining revenue presently accrues to States, according to the Centre cited in the analysis. What changes is the scope for an additional, open-ended and retrospectively recoverable State levy.

That distinction could prove consequential.

The economics of certainty

Mining is unlike many other businesses. It involves long gestation periods, large sunk investments and reserves whose economic viability can change with prices, costs and regulatory conditions.

For an investor, a known tax may be easier to accommodate than an uncertain future liability.

The argument is not that taxation itself is harmful. Rather, excessive or unpredictable cumulative levies can raise the breakeven cost of mining, make marginal reserves uneconomic and defer expansion. Fewer dispatches can then mean lower utilisation of contractors and transport networks, weaker downstream investment and, ultimately, a smaller base for royalty, auction premium, DMF and employment.

The chain can become a fiscal paradox: a higher levy on a shrinking production base may yield less than a predictable levy on an expanding one.

This is particularly relevant to Odisha because the State still has considerable room to expand mineral production. Of the 79 mineral blocks auctioned in the State, 35 had been operationalised by 2025-26. The remaining 44 represent a substantial opportunity for future production.

Between 2020-21 and 2025-26, Odisha collected approximately ₹87,000 crore in auction premium. The larger prize, therefore, may not lie in extracting another levy from mines that are already producing, but in bringing more blocks into operation and ensuring that more mineral is processed within the State.

The measure of success consequently needs to move beyond “tax per tonne” towards “State value captured per tonne.”

That value includes not only royalty and auction premium, but DMF, State GST-related receipts, wages, local procurement, electricity consumption, port and railway activity and the additional value generated when ore is processed and manufactured within Odisha.

When a mine closes, the shock travels

The social consequences are equally important.

Keonjhar and Sundargarh, with their large Scheduled Tribe populations, have economic ecosystems closely connected to mining and mineral-linked transportation. A prolonged contraction in mining can therefore become a highly localised livelihood crisis.

The first employment ring comprises mine employees and contract workers. The second extends to truck owners and drivers, loading and material-handling workers, equipment repair and engineering contractors, tyre and spare-parts businesses, security personnel, canteens and other local services.

Then comes the third ring: pellet plants, sponge iron units, ferro-alloy and steel plants, aluminium, fabrication, construction and logistics.

The implication is stark. A mine closure is not simply a production statistic. For a truck owner who has taken a bank loan, it can become an EMI crisis. For a driver, a wage crisis. For a roadside business, a loss of customers. For a family dependent on the mineral economy, it can become a reason to migrate.

The analysis therefore makes a distinction between mineral deposits and producing economic assets. Tribal districts, it argues, need the latter.

The price of the mineral reaches the household

The mineral economy also has a less visible connection with the common household.

Iron ore feeds steel, pellets and sponge iron, which ultimately enter houses, bridges, railways, automobiles, appliances and public infrastructure. Limestone feeds cement used in homes, schools, hospitals, roads and irrigation works. Coal is an input into electricity, steel, cement and industrial heat. Bauxite feeds alumina and aluminium used in electrical conductors, transport, construction and packaging.

Critical minerals, meanwhile, are increasingly linked to batteries, magnets, electronics, defence and renewable-energy systems.

An abnormal increase in mineral levies can therefore add cost pressure to steel, cement, electricity and fertilisers. It cannot be assumed that a lower mineral tax will automatically translate into lower retail prices, but the fiscal argument is that avoiding an unnecessary layer of cost pressure can help preserve competitiveness.

This becomes especially significant for Odisha's manufacturing ambitions.

From mineral State to manufacturing State

Mining and quarrying account for about 23.1% of Odisha’s industrial Gross Value Added, while manufacturing accounts for approximately 45.6%, according to the figures cited in the analysis.

The strategic opportunity, therefore, is not simply to extract more iron ore, chromite, bauxite or coal and send it elsewhere.

The larger ambition is: Mineral in Odisha → processing in Odisha → manufacturing in Odisha → skilled employment in Odisha → tax and household income in Odisha.

A steel mill, aluminium smelter, ferro-alloy plant or mineral-processing facility makes decisions over decades. An investor considering a ₹10,000 crore or ₹50,000 crore plant near an ore belt must be able to estimate the long-term cost of locally sourced raw material.

The equation is consequently straightforward: assured geology, predictable taxation, ports and rail connectivity and a developed industrial ecosystem make a stronger case for locating value addition close to the resource.

The State Economic Survey has reported 275 investment MoUs involving proposed investments of roughly ₹15.1 lakh crore and significant prospective employment across sectors. The ability to convert such investment intentions into operating assets will depend, among other things, on the competitiveness and predictability of Odisha's mineral ecosystem.

The analysis cites industry estimates from FIMI that one mining job creates 10 indirect jobs and that, for a 1% increase in sector GDP, mining creates 13 times more jobs than agriculture and six times more than manufacturing.

The broader message is that mining need not remain an extractive enclave. It can serve as the raw-material foundation for an industrial economy.

The import-substitution risk

There is another calculation that Odisha cannot afford to overlook.

A mineral is an input cost for a steel, pellet, ferro-alloy or aluminium producer. If locally sourced mineral becomes significantly more expensive than material available from another State or overseas, the buyer has an economic incentive to look elsewhere.

The analysis cites the Centre's broad measure of mineral imports at ₹10.12 lakh crore in FY 2025-26. Against such a backdrop, higher domestic delivered costs could encourage Odisha-based plants to procure minerals from elsewhere.

That could create an unintended cycle: higher local taxation, higher mineral cost, substitution away from Odisha mines, lower dispatches, weaker capacity utilisation and a diminished incentive to establish processing facilities near the resource.

In other words, the mineral that is physically present in Odisha may not necessarily generate its maximum economic value in Odisha.

The DMF lesson

The District Mineral Foundation (DMF) offers another illustration of why production volumes matter.

DMF is linked to royalty, with contributions of 30% for pre-2015 leases and 10% for auctioned leases. Its corpus therefore expands with mineral production.

A tax structure that renders mines uneconomic may produce an immediate levy but shrink the production base on which DMF itself depends.

The policy challenge is consequently not simply to raise the rate of collection but to maintain a sufficiently broad and productive economic base from which the State and mineral-producing districts can collect revenue.

This is also where the amendment's proposed uniformity assumes significance. The policy objective described is “One National, One Mineral Market, One Mineral Tax”, intended to reduce inter-State mineral trade imbalances and improve the ease of doing business.

For Odisha, the test will be whether such uniformity helps unlock investments that have remained on paper and brings more auctioned blocks into production.

The next mineral cycle

Odisha's next mineral cycle may also be broader than the traditional quartet of iron ore, coal, chromite and bauxite.

The State has been selected for national critical-mineral processing support and a Rare Earth Corridor. The Union Budget 2026-27 has also announced a Dedicated Rare Earth Corridor for Odisha.

That creates a different opportunity. Critical minerals require processing, technology, specialised manufacturing and stable long-term investment. A predictable fiscal regime could strengthen the case for locating those activities near the resource.

The economic objective, therefore, is not merely to increase the quantity of mineral extracted. It is to increase the number of operating mines, deepen processing capacity, attract manufacturing investment, improve compliance and strengthen the supply chains around them.

Investment in deeper pits, beneficiation, conveyor systems, waste recovery, digital technology, electrification, safety equipment, reserve development, environmental upgrades and capacity expansion becomes easier to justify when the long-term fiscal environment is predictable.

Every auctioned block that remains non-operational represents not only geology waiting to be mined but also unrealised royalty, premium, DMF, employment and supply-chain activity.

The real test of Section 9D

The political argument surrounding Section 9D is likely to remain sharply divided.

One side sees the restriction on additional State mineral levies as a loss of fiscal autonomy and potentially foregone revenue. The counterargument is that national boundaries on mineral taxation can reduce fiscal unpredictability and protect the viability of long-term projects.

Similarly, one view treats the tax rate as the principal revenue lever. The other emphasises production volume, mineral value and the number of operating mines.

The disagreement over taxation thus conceals a larger disagreement over the development model.

Should Odisha maximise the rent extracted from each tonne of mineral, or maximise the economic activity generated by that tonne?

For a State with extensive mineral resources, the second approach could have a wider multiplier effect.

Every tonne processed in Odisha can support employment and household incomes within the State. Every steel, aluminium or mineral-processing unit located close to the resource can deepen the industrial ecosystem. Every additional operating mine can contribute not only to royalty but also to auction premium, DMF, local procurement, transport, power consumption and associated economic activity.

The ultimate objective is therefore larger than mining revenue.

It is about ensuring that the ore extracted from Odisha creates value in Odisha.

The strongest case for the 2026 amendment, viewed through this lens, is not that taxation is undesirable. It is that predictable taxation of an expanding mineral economy may be economically superior to unpredictable taxation of a shrinking one.

For Odisha, the question before the next mineral cycle is consequently not simply, “How much tax can be collected from one tonne today?”

It is a more consequential one: How much income, State revenue, employment and industrial value can Odisha create from its mineral endowment over the next 25 years?

The answer may determine whether the State's mineral wealth remains primarily something that is extracted — or becomes the foundation on which a deeper, more diversified manufacturing economy is built.