Mining Stocks Plunge as Supreme Court Ruling Upends Royalty Landscape

14 Aug 2024 , 02:26 PM

Shares of miners such as NMDC, Tata Steel, Vedanta, Hindustan Zinc, and MOIL plunged up to 5% on Wednesday after the Supreme Court permitted states to recover past due royalties on mineral-bearing land from the Centre.

PSU National Mineral Development Corporation (NMDC) shares were among the hardest impacted, trading nearly 5% lower on the NSE at Rs 212, while Tata Steel sank more than 4%.

Vedanta shares down 2.5%, while Hindustan Zinc, MOIL, and MMTC were all down 4%.

Shares of Coal India, Orissa Minerals Development Company, and Ashapura Minechem were also under selling pressure, as the move was viewed as a significant blow to mining operators.

A nine-judge Constitution Bench of the Supreme Court, led by Chief Justice DY Chandrachud, rejected the Centre’s request for the prospective effect of its July 25 decision, which upheld states’ authority to levy taxes on mineral rights and mineral-bearing land and allowed them to seek royalty refunds beginning April 1, 2005.

While dismissing the argument that the July 25 verdict had a prospective effect, the court stated that the Centre and mining corporations might pay dues to mineral-rich states in a staggered manner over the following 12 years.

However, the Bench asked the governments not to apply any type of penalty for late payment.

Earlier on July 25, the Supreme Court reversed a 1989 decision that declared that only the Centre has the authority to levy royalties on minerals and mineral-bearing land, and stated that states had the legislative ability to tax mineral rights.

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