Wednesday, June, 03,2026

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DYNAMICS OF FISCAL FEDERALISM IN INDIA

Lately, two nine-judge benches of Supreme Court have heard arguments about the powers of the states to levy tax, on mineral-rich lands and industrial alcohol within their jurisdiction. At the very outset, it is apt to mention that Article 246 declares that Parliament has exclusive power to make laws with respect to any of the matters enumerated in Union List of the Seventh Schedule. Under Entry 52 of the List I, Parliament can enact a law to regulate any industry in public interest. Furthermore, Entries 53 and 54 authorise Centre to regulate mines and mineral development and oilfields, petroleum products, respectively. Likewise, Entry 84 empowers Centre to levy excise duties on medicinal and toilet preparations containing alcohol and opium, Indian hemp, narcotic drugs and narcotics.

The Mines & Mineral (Development & Regulation) Act, 1957, has been enacted by the Parliament, to regulate mines and mineral. It ousts states’ jurisdiction to impose tax, other than royalty, on mineral rights. Likewise, in respect of industrial alcohol, the conflict has arisen from Industrial (Development & Regulation) Act, 1951 (as amended in 2016), which empowers the Centre to take under its control the industries specified in the First Schedule, if it is expedient in the public interest. Under heading 26 of this schedule titled “fermentation industries,” there are sub-headings a) alcohol and b) other products of fermentation industries. This has authorised Central Govt to regulate industries producing, supplying, distributing and indulging in trade and commerce of industrial alcohol.

BACKGROUND

In the backdrop of these disputes is the fact that all states are facing a revenue-expenditure imbalance due to our constitutional framework, which has devised allocation of tax revenue and expenditure between the Union and the states on the basis of comparative advantage. The states incur a bigger share of expenditure even as they earn lesser revenue. Hence, the states are disputing the powers of the Centre in respect of mines, minerals and industrial alcohol as they aim to increase their revenue.

ROYALTY AND MINERAL RIGHTS

Presently, states are levying royalty, at the rates fixed by the Centre, on minerals extracted within their jurisdiction, in accordance with MMDR Act, 1957. The mineral rights are vested in the states and are leased to the lessees. But the states are demanding the right to impose tax on mineral bearing land by differentiating between royalty and tax. Centre’s stand is that royalty is like a tax and there cannot be a further tax on the mineral rights under the federal scheme of the Constitution. Further, Entry 49 (taxes on land & buildings) of the State List cannot include any matter relating to mineral rights. Besides, Entry 50 (taxes on mineral rights) of the State List is subject to any limitations imposed by the MMDR Act, 1957, enacted by Parliament, as expedient in the public interest.

TAX ON MINERAL BEARING LAND

States’ position is that they must be fiscally empowered under the federal scheme of governance mandated by the Constitution. Their standpoint is that imposition of tax on mineral-bearing lands may increase price of minerals but that is not a ground to deprive the states from legitimately exercising powers conferred upon them by the Constitution under the federal structure. States claim that MMDR Act handles development and regulation of mines and minerals but does not deal with taxation. Hence, the states are free to levy tax on mineral bearing lands.

CASE AGAINST THE STATES - MINERALS ARE NATIONAL ASSETS

The Centre’s position is that it is immaterial that royalty is designated as a tax or not. If taxes on mineral rights are imposed, by whatever name, in relation to mineral development under a law made by the Parliament under Entry 54 of Union List, it will be relevant for the purposes of Entry 50 of the State List, which specifically acknowledges that the law to be made under Entry 50 of the State List will be subject to any limitations imposed by the central law. It is logical to conclude that mineral development necessarily includes mineral rights. Grant of mineral rights entails a levy, charge, impost or demand to be collected on the exercise of mineral rights. The framers of the Constitution did not contemplate that a law under Entry 54 of the Union List will not deal with levy on the exercise of mineral rights. Besides, supremacy of the Parliament, in relation to limiting states’ powers to tax mineral rights, is proclaimed by Article 246 of the Constitution.

BEGGARING THE NEIGHBOURS

If a state, endowed with key minerals, imposes a heavy tax, over and above royalty, on mineral extracted, it would result in lop-sided distribution of benefits from national assets. Minerals are required to be regulated by the Union Government through law to protect intergenerational equity and to ensure uniform economic benefits to all, irrespective of where they are concentrated. A tax imposed by a few mineral-rich states would impede foreign investment in mining sector, render minerals costlier and less competitive in international market and result in skewed economic growth among the states. The contention that availability of minerals across the country at competitive prices is essential to prevent, what Adam Smith called “beggaring the neighbours” policies, is quite convincing. Additionally, this will drive mineral, and consequent economic development, across the nation in a harmonised, streamlined and equitable manner.

TAXING ENTRIES CANNOT BE ENLARGED

It is notable that a nonharmonised fiscal regime, varying from state to state would force states, not richly endowed with mineral wealth, to procure raw material at higher prices from mineral rich states – the latter category of states will be at a significant advantage which would come at the cost of national interest in maximising economic development for all from the national mineral assets. The entries on levy of taxes are specifically mentioned in the Seventh Schedule. In substance, the taxing power can be derived only from a specific taxing Entry in an appropriate List [State of Karnataka versus State of Meghalaya (2022 SCeJ 0419)]. It is settled law that the taxing entries in the Seventh Schedule cannot be enlarged and states’ entitlement to impose tax on land and buildings, in Entry 49 of the State List, cannot include any matter relating to mineral rights. (To be concluded)...

THE VIEWS EXPRESSED BY THE AUTHOR ARE PERSONAL

Shrawan Sawhney The writer is a retired IAS officer

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Daily Astro

03-06-2026

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Aries

Ganesha says it will be an important day for you, Aries. Your energy and confidence are ready to take you to new heights. Today you will be able to express your thoughts with clarity, which will increase your communication skills. New opportunities may arise in the working areas, which you have to be ready to take advantage of. In social life, you can make new meetings, which will prove beneficial for you in the future. This day will be good for solving family issues, and you will be able to establish better relations with your close ones. In the field of health, take care of your routine and resort to yoga or meditation to relieve mental stress. Controlling your expenses will be a smart move, as any sudden financial need may arise. Overall, this day is for you to stay positive, just use your insight and energy properly.

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Pisces

Ganesha says it is going to be a positive day for you. Your sensitivity and intuition will flourish today, allowing you to establish better connections between yourself and others. It is time to connect with someone or refresh old memories. Try to communicate with people close to you, as it will strengthen your relationships. In the field of work, your creativity will be cyclical today. If you are working on a project, your ideas will be new and full of innovation. Do not be afraid to share your ideas, it will give you positive feedback from your colleagues. In terms of financial condition, avoid any big investments. Small expenses will prove to be justified but think well before making any big decisions for the long term. In terms of health, focus on a balanced diet and regular exercise. For mental health, practicing meditation or yoga will help keep you stress-free.

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Aquarius

Ganesha says new opportunities are likely to open up for you. You will be in a position to take your creative abilities to new heights. This is the time to share your ideas and make new plans. Your friends and family will support your ideas, so it will be beneficial to take their advice into account. Positive changes are possible in business. This is the right time to work on an important project. You will get an opportunity to use your skills and knowledge properly. But, be careful; in some cases, you will need to control your emotions. In personal life, relationships will deepen. You will try to spend more time with your loved ones. This is a good time for love and companionship. Enjoy emotional moments that will make your relationships stronger. Be health conscious. Dedication to yoga and meditation will give you mental peace. These activities will keep not only your body but also your mind active. Overall, today will be full of possibilities for you. Stay committed to your dreams and work on them.

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Capricorn

Ganesha says your day is full of some new possibilities. You will experience grace and stability in your actions. This is the time to focus on your goals and work with determination to pursue your plans. You are likely to get success in your work, especially if you maintain your hard work and dedication. Positive changes can also be seen in your relationships. You will get a chance to spend time with family and listen to them, which will increase mutual understanding and depth. Focus on communication, as it will make your relationships stronger. However, it is also time to make monthly plans. Take care of your financial matters and try to save. This is the time when you can take concrete steps for your future. Your health condition is likely to remain normal but take some rest. Maintaining a mental balance will be important for you. Stay positive and keep faith in your actions!

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Sagittarius

Ganesha says today will be full of new possibilities and positive energy for you. You will feel a rise in your confidence, which will keep you open to new opportunities. This is the right time to make an important decision. Your spirituality and intuition will be strong, which will enable you to understand and face difficulties. Spending time with friends and family will awaken a sense of happiness and satisfaction in your mind. Relationships with colleagues at work can take a new direction. Cooperation and communication will help solve problems. If you face an obstacle or challenge, remember that you can overcome it. In terms of health, you may need to make a little improvement in your routine. Regular exercise and a balanced diet will give you freshness and energy. Strengthening social relationships and contacting new people will also be beneficial today. This is the time for self-growth and positive change for you, so recognize the energy within you and use it properly.

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Scorpio

Ganesha says today will be full of enthusiasm and energy. You will move towards achieving your goals, and your hard work will pay off. Social life will also be active; you will get a good chance to spend time with friends and family. In terms of health, take a little caution. Focusing on meditation and exercise will help reduce mental stress. This is also a good time to take up a new hobby, which can unleash your creativity. Take wise steps in terms of money. Make informed decisions while investing. For potential financial gains, take a look at past projects again. Your career is showing good signs of progress. Your ideas may be appreciated at the workplace, which will increase your confidence. Still, some issues may require restraint. Overall, today will prove to be positive and auspicious for you. Spend it with pride with your loved ones.

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Libra

Ganesha says today will be a very auspicious and positive day. You will get a chance to clarify your thoughts, which will bring stability to your personal and professional relationships. Your communication skills will increase, and this will open the doors of new possibilities for you. Your creativity and aesthetic sense will be especially strong today. If you are associated with any art or design, your work will be appreciated. This is the right time to express your feelings. If you are confused about a decision, trust your intuition; it will show you the right path. In terms of health, small changes can make your life better. Focus on regular exercise and a balanced diet. In love and relationships, a new understanding will develop, which will strengthen the mutual bond even more. Overall, this day is a sign of positive changes and new beginnings for you. Stay focused on your goals and recognize your inner strengths.

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Virgo

Ganesha says today is a suitable day to highlight your cognitive abilities and business skills. Today, you will be full of clarity and precision in your actions, which will increase your value among your colleagues and superiors. There is a possibility of bringing some changes to your routine, which will bring positive results for you. This is a good time to improve relations with family members. Try to resolve any old disputes, and keep communication open. In terms of health, meditation and yoga will bring mental peace. Also, take some time out of your routine for exercise. From a financial point of view, this is the right time to make a good plan for the right investment. Take a good look at the options available to you and make a wise decision. Overall, today will prove to be a day of new possibilities and positive changes for you. Be full of confidence and stay focused on your goals.

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Leo

Ganesha says today will be a day full of energy and inspiration. Your confidence will increase and your thoughts will come out with clarity. On this day, you will be able to see some new possibilities in your career, which will bring you hard work. Mutual understanding and harmony will increase your relationship, which will create a happy atmosphere among the family. This is a great time to express your thoughts clearly, so do not hesitate to communicate with your partner or friends. It is important to be health conscious, a little exercise and meditation will maintain your mental and physical health. Overall, this day will bring activity and positivity for you, so make the most of all the opportunities!

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Cancer

Ganesha says it will be a day of information and communication for you. Your mind will be full of ideas and you will be able to express your ideas well. There is a possibility of some new opportunities in professional life, which can prove beneficial for you. It is a good time to strengthen relationships with your colleagues, so work together at the workplace. Your emotional state will also be strong. Time spent with family will give you satisfaction. If you have any old problem going on, then the right time is coming to solve it. However, you need to keep your emotions under control, so that you do not get agitated over small things. In terms of health, try to practice yoga and meditation. It will empower you both mentally and physically. Take informed decisions in financial matters; do not rush into any investments. In summary, this day will be all about communication and cooperation, which will lead to positive changes for you.

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Gemini

Ganesha says there will be a new energy and freshness in your thoughts, which will make your personality even more attractive. Social contacts are likely to increase, which will expand your network. You will be inspired to spend blissful time with your friends and family. Some positive changes can also be seen in the business sector. The results of your hard work will gradually start coming, and this will motivate you to move forward. Keep in mind that while sharing your ideology, work with empathy, this will strengthen your relationship with colleagues. It is important to be health conscious. A little attention and relaxation will give you mental freshness. Practicing yoga or meditation will be beneficial for you. This day will be full of positivity and new possibilities for you. Express your mind openly and do not hesitate to adopt new ideas.

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Taurus

Ganesha says it will prove to be a positive day for you, Taurus. You will feel energetic and full of confidence. The time has come to reap the fruits of your hard work and efforts. The workload may stress you for a while, but you will face all the challenges recognizing your strengths. Sweetness will also remain in your relationships. Spending time with your family and friends will be a source of joy for you. Conversation with someone special can give you a new vision and promote mutual understanding. A special occasion may be organized among friends or family, which will bring happiness and harmony to you. Moments spent with loved ones will give you mental peace. It is important to be health conscious. A little exercise or yoga will give peace to your mind and energy to your body. Your day will be full of happiness and positivity, just keep your thoughts and emotions balanced.

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03-06-2026