The Ministry of Mines notified the Ministry of Mines on July 30 and took effect from August 1. The MMDR Amendment Bill received Presidential assent on August 17, 2026.
These rules have led to key changes in how abuses by mining company owners should be dealt with. For example, under the previous enforcement model, financial penalties could be linked to the value and volume of illegally mined minerals and the resulting loss to government exchequer. The new rules create a civil penalties mechanism, with fines that stakeholders described as relatively modest and tied to the size of the lease. They also introduce a summary disposal procedure under which a violation can be dismissed without investigation if the tenant pays a specified minimum fine and corrects the violation.
A detailed questionnaire emailed to the mines ministry seeking comment on the new rules and their impact remained unanswered. A senior ministry official declined to comment.
Experts and officials familiar with mining enforcement described the new system as “tenant-friendly.” They said the rules prescribe a cap or range of civil penalties, a departure from the previous approach to recovering the economic value of illegal mining. Mining lease holders are subject to penalties for illegal actions depending on the area of the lease. For leases of up to five hectares (ha), violations other than reporting violations will attract a fine ranging from Rs 2,000 to Rs 10,000 per hectare. The penalty is ₹3,000–15,000 per hectare for tenancies between five and 50 hectares, ₹4,000–20,000 per hectare for tenancies between 50 and 150 hectares, and ₹5,000–25,000 per hectare for tenancies over 150 hectares, subject to a total cap of Rs 50 lakh.
“The rules can benefit tenants involved in illegal mining. Once a tenant can evade investigation by paying the minimum prescribed fine and eliminating the violation, the deterrent value of enforcement is substantially reduced. It can actually give the tenant a predictable exit route,” said UC Jena, former additional director of an Odisha mining company.
Jena gave the hypothetical example of a leaseholder who mines 12 million tons of minerals but is only allowed 10 tons, a violation that is discovered during an audit. Previously, the lessee would have had to pay the cost of an additional 2 million tons along with a fine. However, the new structure does not allow for cost realization, he said.
Citing Odisha’s experience in cracking down on illegal mining, a former mining official said the state had raised claims of ₹63,000 crore towards recovery of illegally mined minerals and fines during 2001-2010. Following the directions of the Central Empowered Committee, the amount was revised to ₹21,000 crore and the state recovered ₹16,000 crore from defaulting mining leaseholders.
“When a lessee 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 communities affected by the mining. How can a fine amounting to several thousand rupees per hectare help restore the value of the illegally extracted mineral?” – Jena said.
While the new rules require a judge to consider the “undue benefit or benefit accruing as a result of the violation” and its quantifiable amount, in addition to the potential “financial loss to the government,” experts question whether these factors can lead to recovery of the full economic value of illegally mined minerals or whether they simply affect the size of the civil penalty imposed.
Rajib Maitra, Partner, Deloitte Touche Tohmatsu India LLP, said illegal mining or transportation of minerals without legal authority under Section 4 and Section 21 of the MMDR Act was previously a criminal and cognizable offense, while the new rules establish a framework specifically designed to impose administrative or civil penalties for non-compliance.
“Earlier, states were reimbursed for the cost or price of illegally mined minerals along with fine. The new rules do not have a clear provision for reimbursement of costs,” 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 the offenses falling under Section 25A. However, the move to a prescribed civil penalty system has raised concerns that enforcement may become less of a financial penalty if the offense falls under section 25A.
Sankar Prasad Pani, a senior advocate focusing on mining and environment laws, said the rules could not only decriminalize violations of mining laws but could also strip the power of the state. According to him, in many cases, illegal mining is carried out under the guise of leasing both small and large minerals. “The concern is that Rule 6 states that no investigation can be initiated or continued unless the tenant pays the minimum amount specified in the schedule and cures the violation,” Pani said.
The new rules also provide for a three-year period for filing complaints. This means that an authorized official of the Central or State Government must file a complaint for violation of Section 25A within three years from the date of violation. But irregularities in the mining industry can sometimes come to light only after reconciliation of production, shipping, royalty, satellite or inspection data, Pani said, adding that the three-year period could weaken enforcement in cases where irregularities are discovered late.
Amit Bhargava, Partner and National Head, Metals and Mining, KPMG India, said the Mining and Mining Penalty Adjudication Rules, 2026 are an overall attempt to define rules that have been defined substantively to streamline and implement the penalty adjudication system for major minerals. “He intends to do this process digitally. So he is trying to bring more structure, transparency and standardization,” he said.
A senior official of Odisha’s steel and mining department said the new framework should be considered along with the substantive provisions of the amended MMDR Act and other mechanisms to regulate illegal mining. “The new rules should not automatically be perceived as canceling all other legislative mechanisms for recovering the value of illegally extracted minerals,” he explained.