← Policy & Regulation: Financial & market regulation (all topics)
Royalty-on-royalty (SC 2026)
What it is
Statutory royalty under the MMDR Act is charged on Average Sale Price - 15% for iron ore - and DMF and NMET contributions are calculated as a percentage of that royalty. The dispute was whether including royalty in the base amounted to a tax on a tax
The Supreme Court upheld the levy in 2026, and separately confirmed that royalty is payable at the rate in force when the mineral is dispatched, not when the lease was auctioned
Impact on industries
- Settles the cost base upward - miners had provisioned against a favourable outcome, and the ruling converts contingent liabilities into payable amounts
- The dispatch-date ruling removes contractual certainty: a bidder cannot rely on royalty rates prevailing at auction, so future rate rises apply retrospectively to existing leases
- Legal certainty has value in itself - the question had been litigated for years, and resolution lets miners and states plan without contingency
- Effective royalty burden in India is now among the higher rates globally when royalty, DMF and NMET are combined, which weighs on auction bidding