By Bizodisha Bureau, Bhubaneswar, August 16, 2024: Odisha stands to reclaim over Rs 1 lakh crore following the Supreme Court’s approval of retrospective tax collection on mineral-bearing land from 2005. Starting in April 2026, Odisha and other mineral-rich states like Andhra Pradesh and Telangana will begin receiving installments.

The Supreme Court ruled on Wednesday that its July 25 judgment upholding the power of state governments to tax mineral rights and mineral-bearing lands would apply with retrospective effect from April 1, 2005, despite the staunch opposition of the Centre and mining companies. Their demand that states’ right to tax be applied prospectively was rejected.

The ruling also reinstated the Orissa Rural Infrastructure and Socio-Economic Development (ORISED) Act, allowing up to 20% annual tax. The case stemmed from litigation dating back several decades over whether states have the power to tax and regulate under the Mines and Minerals (Development & Regulation) Act (Mines Act).

Eight judges of a nine-member constitution bench led by chief justice D Y Chandrachud had ruled in favour of the states in the July 25 verdict with one dissenter. “This will affect the future of mining unless the government brings a legislation to overcome this judgment,” said RK Sharma, secretary general of the Federation of Indian Mineral Industries (FIMI).

Odisha enacted the ORISED Act in February 2005, but it was struck down by the Odisha High Court later that same year. However, the Supreme Court’s recent verdict overturned the High Court’s decision. This law permits Odisha to levy up to 20% of the annual value of mineral-bearing land.

Starting in April 2026, Odisha will receive pending dues in installments spread over 12 years. Additionally, the state will collect an annual tax of approximately Rs 12,000 crore under the (ORISED) Act, 2004, according to government sources. Tata Steel, in a July 31 exchange filing, disclosed that it would owe Rs 17,300 crore in mineral tax to Odisha under the Supreme Court’s ruling.

Taking Odisha’s dues into account, the total arrears for mineral-rich states since 2005 are expected to exceed the industry estimate of Rs 1.5 lakh-2 lakh crore. This figure includes financial impacts for both public sector undertakings, estimated at Rs 70,000 crore, and private industries.

Andhra Pradesh, which is currently facing financial challenges, also expects to benefit from the Supreme Court’s decision. The state is anticipated to recover between Rs 5,000 crore and Rs 6,000 crore in dues, with installments beginning in April 2026. A senior official from the mines and geology department stated, “We are still making the assessment.”

The decision triggered a slump in metal and mining stocks. Tata Steel dropped 1.6% and NMDC declined 6% among others. The apex court said tax payments to the states can be staggered in installments over a period of 12 years starting April 1, 2026. No interest or penalties will apply on demands made for the period before July 25, 2024.

The decision is likely to have far-reaching consequences, including on consumers. A senior mines ministry official said the decision will take a toll on mining, steel, power and coal companies. Investments by them will also be hit, he said.

Solicitor general Tushar Mehta had argued that any order with retrospective effect would have a huge impact on the economy and would impose a potential liability of Rs 70,000-80,000 crore on public sector undertakings.