In-Depth PIB Analysis3 Items

Core TopicImportantConcise

Economy — Mining, Resources & IndustryGS Paper III

01MMDR Amendment Act 2026 — Uniform Mineral Taxation026th Positive Indigenisation List — 405 Defence Items

International Relations & TradeGS Paper II

03EU Carbon Border Adjustment Mechanism — India's Export Risk

Economy — Mining, Resources & IndustryGeneral Studies Paper III

01

MMDR Amendment Act 2026: Capping State Mineral Levies for a Unified National Market

GS-III · Economy — Mining, Resource Governance; GS-II · Federalism, Centre-State RelationsPrelims + MainsPIB · Ministry of Mines · 18 Aug 2026

The Mines and Minerals (Development and Regulation) Amendment Act, 2026 inserts a new Section 9D prohibiting State Governments from levying fresh taxes on mineral rights or mineral-bearing lands outside conditions prescribed by the Central Government — the most significant centralisation of mineral taxation authority since the foundational MMDR Act, 1957.

◈ Static Background — MMDR Act and India's Mining Governance

India's mineral governance rests on a constitutional and legislative framework stretching back to the colonial era. The Mines Act, 1952 governs safety in mines; the MMDR Act, 1957 governs mineral development and regulation.

Entry 23 of List II (State List) and Entry 54 of List I (Union List) of the Seventh Schedule define the federal architecture — Parliament can override State authority on mineral development in the national interest.

• Entry 54, Union List: "Regulation of mines and mineral development to the extent to which such regulation and development under Union control is declared by Parliament by law to be expedient in the public interest." The MMDR Act invokes this entry — making it a central law that overrides State mining legislation.
• Entry 23, State List: "Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union." States retain authority only where Parliament has not occupied the field.
• Entry 50, State List: Taxes on mineral rights — subject to any limitations imposed by Parliament. The 2026 Amendment directly invokes this to curtail fresh State levies.
• The MMDR Act has been amended several times: in 1986, 1999, 2010, 2015, 2016, 2021, 2023 and now 2026 — each amendment responding to production shortfalls, revenue optimisation or judicial mandates.

◈ What Led Here — The Supreme Court and the Fragmentation Problem

The immediate trigger for the 2026 Amendment is the Supreme Court's nine-judge Constitution Bench ruling in Mineral Area Development Authority v. Steel Authority of India (MADA, 2024), which held that States have the power to levy taxes on mineral rights under Entry 50 of List II — a decision that contradicted decades of the Centre's position and opened the door to fresh State levies.

The 2026 Amendment is a legislative response to reassert central discipline on mineral taxation.

• Before the Amendment, States imposed an estimated 14 categories of levies on mining — royalty, auction premium, dead rent, District Mineral Foundation (DMF) contribution, NMET (National Mineral Exploration Trust) contribution, GST on services, transit fees, environment cess and State-specific cesses.
• Some States had begun taxing mineral-bearing lands at rates up to 20% in the wake of the MADA judgment — a rate that made several mineral projects commercially unviable.
• India imported minerals worth ₹10,12,529 crore in FY 2025–26 — partly because domestic mineral costs, inflated by multiple levies, rendered Indian raw materials less competitive than imports.

▤ MMDR Amendment Act 2026 — Key Provisions at a Glance

• New Section 9D: No State Government shall impose any tax, cess or levy — by whatever name called — on mineral rights or mineral-bearing lands, whether based on mineral quantity, value, royalty or any other basis, except within conditions or restrictions prescribed by the Central Government.
• Treatment of past levies: Arrears not yet paid or collected before the Amendment commencement are treated as invalid and irrecoverable. However, amounts already deposited before commencement shall not be refunded.
• Rule-making power (Section 13 amendment): Central Government empowered to prescribe the conditions under which States may impose mineral-related levies — providing a structured route for States to levy within defined limits.
• Minor minerals unaffected: ~50 minor minerals (sand, gravel, clay, granite, marble, laterite, silica, gypsum) remain entirely under State jurisdiction — the Amendment does not touch these.
• State revenue position preserved: Royalty, auction premium, DMF contributions, NMET contributions and existing levies continue — only fresh, unauthorised levies are prohibited.

The Fiscal Architecture of India's Mineral Sector

• Royalty: A percentage of the value of minerals raised, paid to the State Government — rates set by the Centre under the Second Schedule of MMDR Act. For iron ore: ₹75/tonne (lumps) or 15% of average sale price (ad valorem), whichever is higher.
• Auction Premium: A percentage of the mineral value, additional to royalty, paid by winning auction bidder — entirely a State revenue stream introduced by the 2015 Amendment.
• DMF (District Mineral Foundation): A statutory fund under Section 9B of MMDR Act — 10% of royalty (for mines auctioned post-2015) or 30% (pre-auction mines) — collected by States and directed to districts for local welfare (PMKKKY scheme).
• NMET (National Mineral Exploration Trust): 2% of royalty deposited into a national fund for regional and detailed mineral exploration.
• At an average iron ore sale price of ₹3,000/tonne, the mining company pays ₹3,150 total — of which ₹3,016 (95.7%) flows to the State as various levies. The miner retains only ₹134/tonne gross before operating costs.

State Revenue Under the New Regime — What Changes and What Doesn't

• States received ₹1,14,549 crore in mineral revenue in 2025–26 — approximately 90% of total sector revenue.
• Coal States: Received ₹32,183 crore (89.5% share) in 2025–26 vs ₹11,948 crore (55.6%) in 2014–15 — the auction regime has dramatically increased State receipts.
• Odisha alone earned ~₹87,000 crore as auction premium from 35 operationalised blocks between 2020–21 and 2025–26.
• The Amendment leaves royalty, existing auction premium, DMF and NMET fully intact — the prohibition is exclusively on new, parallel levies that States had begun imposing post-MADA judgment.

Mineral Sector Reforms — A Decade Timeline

• 2015 Amendment: Ended discretionary concession grants; introduced competitive e-auction; added DMF and NMET; fixed tenure of leases (50 years).
• 2021 Amendment: Removed distinction between captive and non-captive mines for sale of minerals; allowed 50% of annual production from captive mines to be sold in open market; permitted exploration by private agencies.
• 2023 Amendment: Added 6 new minerals to atomic minerals list; enabled composite licences for deep-seated minerals; streamlined auction process for critical minerals.
• 2026 Amendment: Caps State mineral levies following MADA judgment — restores fiscal predictability for investors.
• E-Auction track record: 723 major mineral blocks auctioned across 17 States; FY 2025–26 was a record year with 212 blocks auctioned and 36 operationalised. In coal, 141 mines auctioned, 23 operationalised.

Critical Minerals — Strategic Dimension

• National Critical Mineral Mission (NCMM): Approved 29 January 2025; outlay of ₹16,300 crore (including ₹2,600 crore budgetary support) up to FY 2030–31. Targets 1,200 critical mineral exploration projects.
• Critical minerals covered: Lithium, cobalt, nickel, manganese, graphite, rare earth elements, vanadium, titanium, selenium, tellurium — essential for EVs, defence electronics, semiconductors and renewable energy.
• KABIL (Khanij Bidesh India Limited): JV of NALCO, HCL and MECL — acquired exclusive lithium exploration rights in Argentina (Kachi block, Catamarca province); active in Chile and Australia.
• Critical Mineral Processing Parks (CMPPs): Being set up in Andhra Pradesh, Gujarat, Odisha and Maharashtra with ₹500 crore support.
• Recycling scheme: ₹1,500 crore incentive scheme for critical mineral recycling (launched October 2025); 58 entities pledged 850,000 tonnes/year capacity.
• The MMDR 2026 Amendment specifically removes levy barriers on critical minerals (graphite, uranium, thorium) — which were becoming uneconomical to extract domestically due to compound State taxation.

India's Global Mining Position (2025–26)

• Iron ore: Record 313 million tonnes production; India ranked 4th globally.
• Limestone: 484 million tonnes; India ranked 2nd globally.
• Zinc: India ranked 3rd globally.
• Bauxite: India ranked 5th globally.
• Coal: Over 1 billion tonnes for the second consecutive year — India is the world's 2nd largest coal producer and 2nd largest coal consumer.
• Non-coal mineral production value rose 26.8% in FY 2025–26.
• Major mineral States received ₹82,366 crore in mineral revenue in FY 2025–26 — a CAGR of 16.2% over 12 years.

DMF and Community Welfare — What Continues

• 656 District Mineral Foundations are operational, including 106 in Aspirational Districts.
• DMF funds are decided at the district level — roads, hospitals, schools, drinking water, women's SHGs in mining-affected areas.
• PMKKKY (Pradhan Mantri Khanij Kshetra Kalyan Yojana): The scheme under which DMF expenditure is governed; mandates at least 60% on priority areas (drinking water, sanitation, environment, health, education).
• The 2026 Amendment explicitly preserves DMF collections — community welfare ring-fencing is intact.

Critical View — Centre-State Tensions and Judicial Pushback

• Several mineral-rich States (Jharkhand, Odisha, Chhattisgarh, West Bengal, Rajasthan) have publicly opposed the Amendment — arguing it curtails their constitutionally guaranteed taxation powers under Entry 50 of List II.
• The retrospective treatment of arrears as invalid — without refunding amounts already paid — is constitutionally unusual and likely to face judicial challenge as potentially discriminatory against current vs. past levy payers.
• Coal-dependent States argue they bear the environmental and social costs of mining (land degradation, displacement, ground-water depletion) — and need fiscal flexibility to recover these costs through additional levies.
• The Amendment's rule-making route (allowing States to levy within Central prescriptions) could become a prolonged bureaucratic negotiation, creating uncertainty rather than eliminating it.
• A nine-judge bench settled the constitutional position in MADA (2024) — a legislative override raises the question of whether the Amendment itself will be challenged as unconstitutional.

Figure 1 — India's Mineral Revenue Architecture: Who Gets What

MiningCompanypays ₹3,150/t (iron ore)Levy PoolRoyalty + AuctionPremium + DMF+ NMET + OthersState Government~90% of revenue₹1,14,549 cr (2025–26)Centre (NMET)~10% | ₹3,772 cr (coal, 2025-26)DMF (Districts)656 foundationsLocal welfare — PMKKKYNew Section 9D (2026 Amendment)Bars States from fresh levies on mineral rights / mineral-bearing landRoyalty, DMF, NMET, auction premium — all preservedRevenue flows per tonne based on iron ore average sale price ₹3,000/t | FY 2025–26 data

~90% of India's mining revenue flows to States; the 2026 Amendment bars only fresh/additional levies — royalty, auction premium, DMF and NMET remain intact. The dashed box marks the new legislative constraint.

✎ Mains Practice Question

The MMDR Amendment Act, 2026 restricts State Governments from levying fresh taxes on minerals, following the Supreme Court's MADA (2024) judgment. Critically examine the constitutional basis of this legislative response, its implications for Centre-State fiscal federalism, and the likely impact on India's critical mineral security. 15 marks · 250 words

02

6th Positive Indigenisation List: 405 Items, ₹3,070 Crore Business Potential

GS-III · Internal Security — Defence Manufacturing, Indigenisation, Make in IndiaPrelims + MainsPIB · Department of Defence Production · 18 Aug 2026

The Department of Defence Production (DDP) has notified the 6th Positive Indigenisation List (PIL) comprising 405 strategically important items — from sub-assemblies of the Su-30MKI and Advanced Light Helicopter to MRSAM missile components — with an estimated import substitution potential of ₹3,070 crore, deepening India's drive to exit import dependency in defence.

◈ Static Background — The PIL Framework and Its Origins

The Positive Indigenisation List is an instrument of India's Atmanirbhar Bharat defence policy — it identifies items that may no longer be imported after a set date and must be sourced exclusively from Indian manufacturers.

The PIL concept draws on the broader principle of import substitution industrialisation, but applies it with military precision to define platform-specific, time-bound obligations.

• The PIL was first introduced by the Ministry of Defence in 2020 — initially covering major platforms like helicopters, frigates and artillery guns.
• It is distinct from the Defence Acquisition Procedure (DAP) categorisation (Buy Indian-IDDM, Buy Indian, Buy & Make Indian, etc.) — the PIL mandates indigenisation of components already in service, rather than new acquisitions.
• The institutional mechanism is the SRIJAN Portal (srijandefence.gov.in) — launched August 2020 by DDP — through which DPSUs and Service Headquarters offer defence items for indigenous development by industry, including MSMEs and startups.
• Items notified on the PIL are placed on SRIJAN with indicative timelines — once an Indian firm successfully develops and qualifies the item, the DPSU or service must procure it domestically.

▤ 6th PIL — Key Facts

• Total items in 6th PIL: 405
• Indian Coast Guard items: 16
• Defence Public Sector Undertakings (DPSU) items: 389
• Estimated business potential: ₹3,070 crore
• Nature of items: Line Replaceable Units (LRUs), sub-systems, sub-assemblies, spares, components and raw materials
• Air platforms covered: Advanced Light Helicopter (ALH Dhruv), Light Utility Helicopter (LUH), Su-30MKI, Light Combat Aircraft (LCA Tejas), AL-31FP engine (Su-30MKI turbofan)
• Armoured platforms: T-72 (Ajeya), T-90 (Bhishma), BMP-II (Sarath)
• Naval: Warship components
• Missiles: Konkurs-M (anti-tank), Invar (tank-fired ATGM), MRSAM (Medium Range Surface-to-Air Missile)
• Electronics: Radars, sonars, fire control systems, satellite communication systems
• Ammunition: High Explosive Anti-Tank (HEAT) rounds and other critical ammunition

Cumulative Indigenisation Achievement — Across All 6 Lists

• The first five PILs had notified 5,012 items on SRIJAN — the 6th PIL adds 405 more.
• Total items offered for indigenisation on SRIJAN since August 2020: more than 33,000 (across PILs and voluntary DPSU/SHQ offerings).
• Items successfully indigenised to date: more than 15,700 — generating an estimated import substitution value of ₹9,000 crore over five years.
• DPSUs have placed procurement orders worth approximately ₹10,000 crore on domestic vendors up to March 2026.
• Defence exports have risen ~50× to approximately ₹23,622 crore in FY 2024–25 — reaching ~100 countries from fewer than 10 a decade ago.

Lineage — Defence Indigenisation Policy Framework

• DPP 2016 (Defence Procurement Policy): Introduced "Make in India" preference categories in defence acquisition — the first systematic framework for domestic procurement.
• DAP 2020 (Defence Acquisition Procedure): Replaced DPP 2016; strengthened Buy Indian-IDDM (Indigenously Designed, Developed and Manufactured) as the highest preference category; reduced foreign vendor direct purchase.
• SRIJAN Portal (August 2020): Digital marketplace connecting DPSUs/SHQs (who need indigenisation) with domestic industry (who can supply).
• 1st PIL (August 2020): 101 items — major platforms (helicopters, frigates, transport aircraft, missiles, artillery). Import embargo from December 2020 to December 2025 in stages.
• 2nd PIL (May 2021): 108 additional items — ammunition, radars, surveillance systems.
• 3rd PIL (December 2021): 101 items — more sub-systems and electronic components.
• 4th PIL (August 2023): Additional items including airborne early warning systems and satellite components.
• 5th PIL (November 2024): Approximately 346 items — expanding to naval underwater systems and drone components.
• 6th PIL (August 2026): 405 items — deepest dive into sub-assembly and component level, covering LRUs of all major current platforms.

Key Platforms and Their Indigenisation Context

• Su-30MKI: India's primary air superiority fighter (272 aircraft); originally built with Russian TOT (Transfer of Technology) by HAL. The AL-31FP engine — a 4th-generation turbofan — has ~30% hot-section components still sourced from Russia; the 6th PIL targets these sub-assemblies.
• Advanced Light Helicopter (ALH Dhruv): HAL-designed rotorcraft used by Army, Navy, Air Force and Coast Guard (~340 in service); avionics and transmission components are on the PIL.
• LCA Tejas: The indigenous 4th+ generation fighter; many sub-systems (radar, EW suite, mission computer) are still imported — the PIL accelerates domestic alternatives.
• T-90 Bhishma / T-72 Ajeya: India's main battle tank fleet (~3,000 T-90s ordered); ERA (Explosive Reactive Armour) blocks, fire control sub-systems and thermal imaging components are PIL items.
• MRSAM: Indo-Israeli jointly developed air defence system (IAI/DRDO/BEL); seeker and guidance sub-assemblies are being targeted for domestic production.

Industry Ecosystem — DPSUs and MSMEs

• India has 9 DPSUs: HAL, BEL, BDL, BEML, MIDHANI, MDL, GRSE, GSL and Armoured Vehicles Nigam (AVNL) — formed from OFB (Ordnance Factory Board) corporatisation in 2021.
• The PIL specifically targets MSMEs as the primary indigenisation route — making precision components, forgings and electronics that DPSUs currently import.
• iDEX (Innovations for Defence Excellence): Startup-focused innovation fund; over 400 startups supported; some iDEX winners are now designated PIL vendors.
• Defence corridors: Uttar Pradesh Defence Industrial Corridor and Tamil Nadu Defence Corridor are designed to anchor MSME clusters near defence production hubs.

Critical View

• Quality vs. speed tension: Timelines for PIL indigenisation are indicative, not binding — several items from the 1st PIL (2020) have seen delays of 2–3 years due to manufacturing capability gaps in domestic industry.
• Technology depth: Component-level indigenisation at the LRU level is technically demanding — sub-systems like turbofan hot sections, active phased-array radar modules and advanced seeker heads require materials and manufacturing precision that India's industrial base is still building.
• Import embargo enforcement: Services can seek waivers if no acceptable domestic alternative exists within the timeline — weakening the embargo's coercive effect.
• R&D investment gap: India's defence R&D spend is ~2.4% of the defence budget (~₹27,000 crore) — compared to the US (~12%) and China (est. ~8–10%). Sustained indigenisation requires higher R&D investment.

Figure 2 — Six Positive Indigenisation Lists: Cumulative Growth (2020–2026)

100020003000400050006000PIL 1101Aug 2020PIL 2209 cum.May 2021PIL 3310 cum.Dec 2021PIL 4~750 cum.Aug 2023PIL 55,012 cum.Nov 2024PIL 65,417 cum.Aug 20265,0125,417Cumulative PIL items notified | PIL 5 covers 346 items from Nov 2024; PIL 6 adds 405 items (Aug 2026) | 33,000+ items on SRIJAN portal total

The 6th PIL (August 2026) adds 405 items, bringing the cumulative count of PIL-notified items to ~5,417. Of the 33,000+ items on the SRIJAN portal, 15,700+ have been successfully indigenised with ₹9,000 crore in import substitution.

✎ Mains Practice Question

India's Positive Indigenisation Lists represent a supply-side push towards defence self-reliance. Critically evaluate the effectiveness of this policy instrument in reducing India's defence import dependence, identifying key structural bottlenecks and suggesting a framework for sustainable indigenisation of critical defence sub-systems. 15 marks · 250 words

International Relations & TradeGeneral Studies Paper II

03

EU CBAM: India's Exporters Face Carbon Tax Compliance from 2026

GS-II · International Relations — EU, Trade; GS-III · Economy — Trade Policy, Climate FinancePrelims + MainsPIB · Department of Commerce · 19 Aug 2026

The Department of Commerce organised an awareness session on EU Carbon Border Adjustment Mechanism (CBAM) regulations for Indian exporters — as the mechanism transitions from the transitional phase (October 2023 – December 2025) to the definitive phase (from January 2026), requiring Indian exporters of steel, aluminium, cement, fertilisers, hydrogen and electricity to purchase CBAM certificates for the embedded carbon in their exports to the EU.

◈ Static Background — What is CBAM and Why It Was Created

The Carbon Border Adjustment Mechanism (CBAM) was adopted by the European Union under Regulation (EU) 2023/956 as part of the EU Green Deal and the Fit for 55 legislative package — a set of policies targeting a 55% reduction in EU greenhouse gas emissions by 2030 vs 1990 levels.

CBAM's core purpose is to prevent carbon leakage — the risk that EU industries, facing rising carbon costs under the EU Emissions Trading System (EU ETS), relocate production to countries with weaker climate regulations, or that EU imports from such countries gain an unfair cost advantage.

• EU ETS (Emissions Trading System): The world's largest carbon market, operational since 2005; covers ~40% of EU greenhouse gas emissions. Industries must hold ETS allowances for every tonne of CO₂ they emit; the price per allowance has ranged from €50–€100/tonne in recent years.
• Carbon leakage: If a EU steel producer pays €80/tonne for carbon while an Indian competitor pays nothing, the Indian product enjoys an artificial cost advantage — CBAM corrects this by charging the equivalent carbon cost at the EU border.
• WTO compatibility: CBAM has been designed to be consistent with WTO rules under Article XX(b) (environmental exceptions) — though several countries, including India and China, have contested this at the WTO.
• Transitional Phase (Oct 2023 – Dec 2025): Importers only needed to report embedded emissions — no payment required.
• Definitive Phase (from January 2026): Importers must purchase CBAM certificates at a price linked to the EU ETS carbon price; free ETS allowances for covered sectors are phased out by 2034.

▤ CBAM — Coverage, Sectors and India's Exposure

• Sectors covered by CBAM (Phase 1): Iron and steel, aluminium, cement, fertilisers, hydrogen, electricity.
• India's exports at risk: Iron and steel exports to the EU (estimated ~$3–4 billion annually); aluminium products; some fertiliser products. Exact exposure depends on embedded carbon intensity.
• CBAM certificate price: Linked to the weekly average EU ETS allowance price — currently ~€50–€70/tonne CO₂.
• Embedded carbon: The carbon emitted during the production of the imported good (direct and, for some sectors, indirect emissions).
• Offset mechanism: If the exporting country has a domestic carbon price (e.g. a carbon tax or ETS), CBAM certificates may be adjusted downward — India currently has no domestic carbon price; however, the Carbon Credit Trading Scheme (CCTS) under the Energy Conservation (Amendment) Act 2022 is being developed.

India's Policy Response and Challenges

• India has formally raised concerns at the WTO — arguing CBAM is a disguised trade restriction and violates the principle of Common But Differentiated Responsibilities (CBDR) under the UNFCCC.
• The Energy Conservation (Amendment) Act, 2022 enables the creation of India's domestic carbon market — the CCTS. If India's carbon market gains international recognition, Indian exporters could use domestic carbon credits to offset CBAM liability.
• Bureau of Energy Efficiency (BEE) and the Ministry of Commerce are working on a framework for Indian industries to calculate and certify embedded carbon in products — a prerequisite for CBAM compliance.
• Steel sector risk: India is the world's 2nd largest steel producer (~144 million tonnes in FY 2024–25); EU is a significant export destination. The emission intensity of Indian steel (~2.4 tonnes CO₂/tonne steel) is higher than EU average (~1.9 tonnes) — placing Indian steel at greater CBAM liability.
• Green steel push: Several Indian steelmakers (Tata Steel, JSW, SAIL) have announced green steel targets using hydrogen-based Direct Reduced Iron (DRI) — reducing carbon intensity for EU-bound exports.

Key Terms for UPSC

• Carbon leakage: Relocation of carbon-intensive production from high-carbon-cost to low-carbon-cost jurisdictions — the economic rationale for CBAM.
• EU ETS: The EU's cap-and-trade carbon market; CBAM certificate price is tied to ETS allowance price.
• CBDR (Common But Differentiated Responsibilities): UNFCCC principle that developed nations bear greater historic responsibility for climate change and should carry a heavier mitigation burden — India cites this against CBAM.
• Carbon Credit Trading Scheme (CCTS): India's domestic carbon market under development; coverage of hard-to-abate sectors like steel, cement, aluminium.
• Green steel: Steel produced with reduced carbon intensity — using hydrogen-based DRI, electric arc furnaces (EAF) with renewable power, or carbon capture.
• Fit for 55 Package: The EU legislative framework to cut emissions 55% by 2030 — includes CBAM, revised ETS, renewable energy and energy efficiency directives.

✎ Mains Practice Question

The EU's Carbon Border Adjustment Mechanism (CBAM) has significant implications for India's trade in carbon-intensive goods. Analyse the challenges CBAM poses to Indian exporters, evaluate India's policy responses including the domestic carbon market under development, and discuss how India can use CBAM as a lever to accelerate its green transition. 15 marks · 250 words