Justice Nagarathna's Dissent: Potential Breakdown of Federal System Over Mineral Taxes

In a dissenting opinion, Supreme Court Justice B V Nagarathna warned that granting states the power to levy taxes on mineral resources could lead to a breakdown of the federal system. She argued that such a move would catalyze unhealthy competition among states, adversely affecting mineral development and the national economy.

In a landmark dissenting verdict, Supreme Court judge Justice B V Nagarathna on Thursday emphasized that granting states the power to levy taxes on mineral resources could jeopardize India's federal structure. According to her, this could lead to unhealthy competition among states, risking the overall development of the mineral industry.

Justice Nagarathna stood alone on the nine-judge constitution bench, disagreeing with the majority opinion penned by Chief Justice D Y Chandrachud, which allocated legislative power to tax mineral rights to the states. She argued that royalty on minerals is indeed a tax, contrary to the majority's view that it is merely a contractual payment.

She cautioned that the consequences of such power decentralization would include steep hikes in mineral costs, economic instability, and unhealthy competition among states to secure mining leases. Justice Nagarathna also highlighted that such a shift could negatively impact foreign exchange reserves and lead to a decline in mining activities in mineral-rich states.