The Union Cabinet on Wednesday approved royalty rates for the mining of three critical and strategic minerals — lithium, niobium, and rare earth elements (REEs). The approved royalty rates are 3 per cent each for lithium and niobium and 1 per cent for REEs.
This Cabinet approval will enable the central government to auction blocks for these minerals for the first time in the country.
“The Union Cabinet chaired by the Prime Minister Shri Narendra Modi approved amendment of Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957, for specifying rate of royalty in respect of 3 critical and strategic minerals, namely, lithium, niobium and rare earth elements (REEs),” the mines ministry said in a statement.
It decided to specify royalty rates of these three minerals — (i) Lithium – 3 per cent of London Metal Exchange price; (ii) Niobium – 3 per cent of average sale price (both for primary and secondary sources), (iii) REE — 1 per cent of average sale price of rare-earth oxide,” the mines ministry said in a statement.
Recently, Parliament passed the Mines and Minerals (Development and Regulation) Amendment Act, 2023, which delisted six minerals, including lithium and niobium, from the list of atomic minerals, thereby allowing the grant of concessions for these minerals to the private sector through auction.
Further, the amendment provided that the mining lease and composite license of 24 critical and strategic minerals (which are listed in Part D of the First Schedule of the Act), including Lithium, Niobium and REEs (not containing Uranium and Thorium), shall be auctioned by the central government.
“Today’s approval of the Union Cabinet of specification of rate of royalty will enable the Central Government to auction blocks for lithium, niobium and REEs for the first time in the country. The royalty rate on minerals is an important financial consideration for the bidders in the auction of blocks. Further, the manner for calculation of Average Sale Price (ASP) of these minerals has also been prepared by the Ministry of Mines which will enable determination of bid parameters,” the ministry stated.
The Second Schedule of the MMDR Act provides royalty rates for various minerals. Item No.55 of the Second Schedule provides that the royalty rate for the minerals whose royalty rate is not specifically provided therein shall be 12 per cent of the average sale price (ASP).
Thus, if the royalty rate for lithium, niobium and REE is not specifically provided, then their default royalty rate would be 12 per cent of ASP, which is considerably high as compared to other critical and strategic minerals. Also, this royalty rate of 12 per cent is not comparable with other mineral-producing countries.
Critical minerals have become essential for economic development and national security in the country. Critical minerals such as Lithium and REEs have gained significance in view of India’s commitment towards energy transition and achieving net-zero emission by 2070.
Lithium, niobium and REEs have also emerged as strategic elements due their usages and geo-political scenario. Encouraging indigenous mining would lead to a reduction in imports and the setting up of related industries and infrastructure projects. The proposal is also expected to increase the generation of employment in the mining sector.
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