Across the world, the sovereign / federal / union government usually owns title to all minerals. The big exception is the USA where land owners also own the minerals beneath the earth. Even there, the federal government owns 1/3rd of the land. For India though, it is a simple question with a complex answer.
Under Article 297 of our Constitution, offshore minerals are owned by the Union (Central) Government. However, onshore minerals have a more complex ownership. Article 294 & 295 of our Constitution essentially says that the States are successors to the properties and estates of the governments that previous ruled those areas. Now India was constituted by the British Raj plus over 500 princely states, and there are variations in the legal position.
As an overall generalization, the States own sub-soil minerals. For instance, in Goa, Article 2 of the Portuguese Mining Code 1906 clearly states that the minerals were owned by the government. Consequently, the state of Goa now owns sub-soil minerals. There are exceptions, as brought out clearly in the Lodha judgement in 2013. This dealt with a particular type of land in the Malabar region, Jeymom lands. The Supreme Court held that in the particular case before it, the owner of the land owned title to the minerals. But the rule is that the state owns the minerals.
There are some complications though. Mining in areas falling within the Fifth Schedule of our Constitution (tribal areas across peninsula India) requires the prior consent of gram sabhas, who may reject applications, or impose conditions. Mining in areas falling within the Sixth Schedule of our Constitution (semi-autonomous tribal areas in the North East) also provides for a share of royalties to be paid over to District Councils, after agreement between the state government and the district council. And the largest complication is that mining is in the Concurrent List in the Seventh Schedule of the Constitution. What this means is that no matter who is the owner, the Center is in control. It sets royalty rates, terms of auctions, etc for major minerals.
However, Article 371(A) gives the Legislative Assembly of Nagaland the right to decide whether a union law relating to “ownership and transfer of land and its resources” would apply to the state of Nagaland or not. This would include the MMDR and other mining acts. In fact, the CM of Nagaland is opposing the auction of oil blocks precisely under this provision. Article 370 provides even broader rights to Jammu & Kashmir.
So when does the mining leaseholder gain title to the minerals. When three conditions are fulfilled (a) there is a valid mining lease and all other clearances; (b) “winning the ore” – when the lease holder has separated the ore from the earth; and (c) when the mining lease holder has paid for the minerals (the consideration). Now this is plainly the royalty under the mining lease. Otherwise, what would the owner of the Jeymom lands get as compensation? Strangely, the question of whether royalty is a tax or a consideration for the mineral is before the Supreme Court. It awaits a 9 judge bench for considering this critical point. If it rules that royalty is a tax, then what consideration does the owner receive for its minerals? Why would the state give away minerals free to mining leaseholders? That would be absurd. However, if royalty is consideration for the mineral, surely it is a capital receipt on account of the sale of mineral assests, not a revenue receipt?