The Mines and Minerals Adjudication of Penalties Rules, 2026, were notified by the mines ministry on July 30 and brought into force from August 1. The MMDR Amendment Bill received the President’s assent on August 17.
The rules have brought about a key change in how violations by mining lease holders are to be dealt with. For example, under the earlier enforcement model, financial penalties could be linked to the value and extent of the illegally extracted minerals and the resulting loss to the public exchequer. The new rules create a civil-penalty mechanism with penalties that stakeholders described as relatively modest and linked to the lease size. They also introduce a summary-disposal route, under which a violation can be closed without an inquiry if the lease holder pays up the prescribed minimum penalty and rectifies the violation.
A detailed questionnaire emailed to the mines ministry seeking comment on the new rules and their impact went unanswered. A senior ministry official declined to comment.
Experts and officials familiar with mining enforcement described the new framework as “pro-lessee”. They said the rules prescribed a defined ceiling or range on the civil penalty — which is a departure from the earlier approach of recovering the economic value of illegal extraction. For mining lease holders, penalties for illegalities have been prescribed according to the area of the lease. For a lease of up to five hectares (ha), violations other than reporting-related ones attract a penalty of ₹2,000 to ₹10,000 per ha. The penalty is ₹3,000-15,000 per ha for leases above five and up to 50 ha, ₹4,000- 20,000 per ha for leases above 50 and up to 150 ha and ₹5,000-25,000 per ha for leases exceeding 150 ha, subject to an overall ceiling of ₹50 lakh.
Reporting-related violatio- ns are capped at ₹5,000, ₹1 lakh, ₹2 lakh and ₹3 lakh, depending on the lease size.
“The rules may benefit lessees involved in illegal mining. Once a lessee can walk away from an inquiry by paying the minimum prescribed penalty and rectifying the violation, the deterrent value of enforcement is substantially diluted. It could effectively give the lessee a predictable exit route,” said U C Jena, former additional director of mines, Odisha.
Jena gave the hypothetical example of a lessee who extracts 12 million tonnes (mt) of minerals but is permitted only 10 mt — a violation that is detected during an inspection. Earlier, the lessee would have to pay up the cost of the extra 2 million tonnes along with a penalty. However, the new framework has no provision for cost realisation, he said.
Citing Odisha’s experience with illegal mining, the former mining official said the state had raised demands of ₹63,000 crore towards the cost of illegally extracted minerals and penalties during 2001-10. Following directions by the Central Empowered Committee, the amount was revised to ₹21,000 crore and the state recovered ₹16,000 crore from defaulting mining lease holders.
“When a lease holder extracts minerals beyond the permitted quantity, the economic benefit can run into hundreds of crores of rupees, while the environmental and social costs are borne by the state and mining-affected communities. How can a penalty calculated at a few thousand rupees per hectare help to recover the value of the mineral wrongfully extracted?” Jena said.
Although the new rules require an adjudicating officer to consider “undue gain or benefit derived out of contravention” and its quantifiable amount besides the potential “financial loss to the government”, experts questioned whether these factors can result in recovering the full economic value of illegally extracted minerals, or whether they merely influence the quantum of the civil penalty prescribed.
Rajib Maitra, partner, Deloitte Touche Tohmatsu India LLP, said illegal mining or transportation of minerals without lawful authority under Section 4 and Section 21 of the MMDR Act was earlier a criminal and cognizable offence, whereas the new rules establish a framework specifically for adjudicating administrative or civil penalties for regulatory non-compliance.
“Earlier, alongside the penalty, states recovered the cost or price of the illegally extracted minerals. The new rules do not carry forward an explicit cost-recovery provision,” he said.
The rules have been framed under Section 25D of the Mines and Minerals (Development and Regulation) Act, 1957 (67 of 1957) and govern contraventions covered by Section 25A. The shift towards a prescribed civil-penalty framework has, however, raised concerns that enforcement could become less financially punitive where the violation falls within Section 25A.
Sankar Prasad Pani, a senior advocate dealing with mining and environmental laws, said the rules may not only decriminalise violations of mining laws but could also take away the power of states. Many times, he said, illegal mining takes place under the guise of a lease for both minor and major minerals. “What concerns is that Rule 6 says no inquiry shall be initiated or continued if the lessee pays the minimum amount specified in the schedule and rectifies the contravention,” Pani said.
The new rules also prescribe a three-year limit on complaints. This means an authorised gazetted officer of the Central or state government has to file a complaint for a Section 25A contravention within three years of the date of the contravention. But mining violations can sometimes surface only after reconciling production, dispatch, royalty, satellite or inspection data, Pani said, adding that the three-year window could weaken enforcement in cases where irregularities are detected late.
Amit Bhargava, partner and national leader, Metals and Mining, KPMG in India, said the Mines and Minerals Adjudication of Penalties Rules 2026, are an overall endeavour to specify rules that have been defined essentially to streamline and implement the penalty adjudication framework for major minerals. “It intends to have the process digitally executed. It therefore attempts to bring in more structure, transparency and standardisation,” he said.
A senior official of the Steel and Mines department, Odisha, said the new framework must be read alongside the substantive provisions of the amended MMDR Act and other mechanisms governing illegal mining. “The new rules should not automatically be read as abolishing every other statutory mechanism for recovering the value of illegally raised minerals,” he clarified.
