Mining Industry Sees Cess Hike to Support Public Programs

The state government of Jharkhand has approved a hike in cess on coal and iron ore to Finance its social security schemes. The decision, announced on March 18, represents a significant change in policy for the state’s mining industry.

Under the new rates, cess on coal will increase from ₹100 per metric ton (MT) to ₹250/MT ($3/MT), while cess on iron ore will go from ₹100/MT to ₹400/MT ($4.59/MT). This action is predicted to bring in a significant income which will be used to fund welfare programs meant to enhance residents’ lives.

The increase comes as the government of Jharkhand seeks to widen its social security umbrella, a state government official said. “With this additional revenue, we will be able to implement welfare schemes and provide better infrastructure, education, and healthcare for our population in Jharkhand,” the official said.

The move follows a landmark Supreme Court ruling in July 2024 that clarified — in favor of state governments the taxation rights at the state level over mining activities. It ruled that the royalties from mining operations received by the central government could not be treated as taxes. Even more significant, it gave individual states the power to impose their taxes on mining operations taking place within their borders.

An end to a dispute that lasted over three decades between the state governments and the central government. Now, as one of India’s most mineral-rich states, Jharkhand is using the ruling to squeeze more revenue from its abundant coal and iron ore reserves.

The cess will likely have a cascading impact, leading to higher production costs for firms operating in the state. The government, however, calls the decision a necessary measure to ensure that the state’s natural resources make a direct contribution to the welfare of the people.