Listed below are two take a look at circumstances as proof:
Odisha The state’s personal FRBM assertion initiatives mining income of ₹56,000 cr for FY27, accounting for almost 80% of its non-tax income. That share has grown steadily since FY22, pushed by lease renewals and auctioning of latest mineral blocks, not by further levies.
Odisha’s non-tax income, at round ₹71,000 cr, has caught up with its personal tax income of round ₹70,000 cr. Most Indian states rely nearly solely on direct (devolved from GoI) and oblique (principally through GST) taxation for his or her income. Odisha has constructed a second engine that runs in parallel to it, powered by minerals. That second engine is now doing almost half the work.
However Odisha did not cease at constructing the engine. It additionally constructed a shock absorber to go along with it. It arrange a Price range Stabilisation Fund, a portion of mining surpluses banked yearly. That single design selection is what helps maintain fiscal well being from the vagaries of commodity costs.
Considerably, the state imposed no levies of its personal. Unsurprisingly, it ranked 1st in NITI Aayog’s Fiscal Well being Index (FHI) launched earlier this 12 months.
Jharkhand third on FHI is not a conventional financial heavyweight, when it comes to per-capita earnings, or dimension of GDP, however is wealthy in assets. Curiously, the state imposed a cess in 2024-25 on mineral-bearing lands. However in 2025-26, mining income fell effectively wanting goal, confirming that greater levies do not essentially translate into greater income.
States need not impose their very own levies as a result of income from GoI-levied royalty, District Mineral Basis (DMF) funds, and public sale premiums, all go to them. States must concentrate on implementation. They have to put extra blocks to public sale and guarantee a fast begin to manufacturing, since revenues solely accrue if blocks produce.
Alternative is just rising. An increasing demand for, and pipeline of, mineral blocks for rising applied sciences that vary from battery and clean-energy provide chains to AI infrastructure transfer the needle in methods GoI transfers and oblique taxation can’t. States that convert mineral wealth into regular income streams release fiscal house for productive funding in infrastructure, human capital and public companies.
As we speak, mining contributes to round 2% of India’s GDP, whereas in international locations with related geology like Australia, South Africa and Canada, it contributes 8-10% of GDP. Minerals like copper, aluminium, nickel, lithium and even silver are essential to financial and nationwide safety. Together with oil and fuel, they’re on the centre of geopolitics and geoeconomics. India should produce way more to substitute imports and finish dependency on a handful of countries, which dominate the present provide chains.
States can play a lead. There are loads states with big mineral – and hydrocarbon – potential, from Rajasthan within the west to West Bengal and Assam within the east to Karnataka, Tamil Nadu and Andhra Pradesh within the south. Since states have probably the most to achieve when it comes to income, job creation and development, they need to guarantee, by working along with GoI, sooner approvals and simpler land acquisition in order that manufacturing shouldn’t be delayed.
Even Odisha and Jharkhand have solely scratched the floor. Their manufacturing potential is way greater. An emphasis on the manufacturing of pure assets – whereas adhering to GoI’s philosophy of affordable levies – will appeal to funding and provide a pathway to extend non-tax income (with out burdening particular person taxpayers with excessive gas taxes, for instance), enhance productive expenditure (on infrastructure), and guarantee sound fiscal well being.
Nayyar is chief economist, andPathak is economist, Vedanta
