Coal India to pay ₹38,000 cr to states after SC verdict, expects 80% recovery via FSAs
New Delhi: Coal India will have to shell out around ₹38,000 crore to mineral-rich states over the coming years following a Supreme Court ruling that allowed states to levy taxes on mineral rights and mineral-bearing lands retrospectively, official sources told Financial Express.
The state-owned coal miner, however, is hopeful of recovering nearly 80% of the amount through its Fuel Supply Agreements (FSAs) with the power sector.
The financial hit largely falls on two of Coal India’s subsidiaries—Mahanadi Coalfields Limited and Central Coalfields Limited—according to the company’s chairman and managing director P M Prasad.
“The quantum they (the subsidiaries) will have to pay to the state governments is around ₹38,000 crore. They will take from the power sector and pay to state governments. While 80% they will recover from FSAs and the power sector, the remaining 20% CIL will bear,” an official said.
He also clarified that the company would not need to pass the burden onto consumers.
“We may have some 10-20% loss but will be able to recover the rest,” he added.
In the third quarter of FY25, Coal India reported revenue from operations at ₹35,779.78 crore.
For the full financial year FY24, the figure stood at ₹1.42 lakh crore.
The Supreme Court ruling, delivered in August last year, marked a major shift in the legal position on taxation of minerals.
It granted states the legislative authority to tax mineral rights and mineral-bearing lands in addition to royalty, with retrospective effect.
The majority verdict ruled that royalty is not a tax but a contractual consideration, thereby overruling the earlier India Cements case which had treated royalty as a tax.
The Court further clarified that Entry 54 of the Union List is regulatory in nature and does not empower the Centre to impose such taxes.
The ruling is expected to significantly alter the fiscal dynamics between the Centre and states, with wide implications for mineral resource management and revenue sharing in India, according to experts.
Meanwhile, Coal India continues to expand its footprint beyond traditional coal mining.
The company is actively exploring acquisitions of critical mineral assets abroad, particularly in Australia, Argentina, and Chile.
“Around fifteen non-disclosure agreements have been signed so far with several companies across the critical mineral value chain. Initial due diligence has been completed for some of those assets,” the company told FE.
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