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Cabinet Approves Royalty Rates for Lithium & Two Other Strategic Minerals


The Centre has approved an amendment to a key law in order to specify competitive royalty rates for the mining of three strategically significant minerals – lithium, niobium, and rare earth elements (REEs).


GS III: Science and Technology

Dimensions of the Article:

  1. Critical Minerals
  2. Identification of 30 Critical Minerals by the Indian Government
  3. Lower Royalty Rates for Strategic Minerals: Key Points
  4. Significance of Lower Royalty Rates

Critical Minerals:

  • Critical minerals are minerals that pose a relatively higher risk of supply shortage and have associated impacts on the economy, setting them apart from other raw materials.

Importance of Critical Minerals

  • These minerals are indispensable for economic development and national security, and their limited availability or concentrated extraction and processing in specific geographic areas can create vulnerabilities in global supply chains.

Applications of Critical Minerals

  • Critical minerals like lithium, graphite, cobalt, titanium, and rare earth elements play essential roles in various sectors, including high-tech electronics, telecommunications, transportation, and defense.

Strategic Value Chains

  • These minerals are part of multiple strategic value chains that encompass clean technology initiatives (e.g., zero-emission vehicles, wind turbines, solar panels), information and communication technologies (including semiconductors), and advanced manufacturing inputs and materials used in defense applications, permanent magnets, ceramics, and more.

Identification of 30 Critical Minerals by the Indian Government

  • The Indian government identified 30 critical minerals based on a report prepared by an expert team under the Ministry of Mines.
  • The list will be reviewed periodically.
  • A three-stage assessment process was employed to determine the critical minerals.
    • In the first stage, the panel examined strategies from countries like Australia, the USA, Canada, the UK, Japan, and South Korea, identifying a total of 69 critical elements/minerals.
    • The second stage involved inter-ministerial consultations to identify minerals critical to specific sectors.
    • The third stage assessment developed an empirical formula for evaluating mineral criticality, considering economic importance and supply risk. This resulted in the identification of 30 minerals critical for India, including two critical as fertilizers.

Lower Royalty Rates for Strategic Minerals: Key Points

Aligning Royalty Rates with Global Standards

  • New royalty rates have been specified by amending the Second Schedule of the Mines and Minerals (Development and Regulation) Act 1957 to bring India’s rates in line with global benchmarks.
  • Current Royalty Rates
  • The existing MMDR Act 1957 mandates a royalty rate of 12% of the average sale price (ASP) for minerals not specifically listed in the Schedule.

Lower Royalty Rates for Strategic Minerals

  • Following the Cabinet’s decision, lithium mining will now attract a 3% royalty based on the London Metal Exchange price.
  • Niobium will also be subject to a 3% royalty, calculated based on the ASP, for both primary and secondary sources. Niobium is used in various applications, including in alloys for jet engines and construction materials.
  • Rare Earth Elements (REEs) will have a 1% royalty based on the ASP of Rare Earth Oxide, which is the common form of ore where REEs are found.

Calculation of ASP

  • The Ministry of Mines has outlined the method for calculating the ASP of these minerals, which will determine bid parameters.

Significance of Lower Royalty Rates

  • These reduced royalty rates pave the way for the commercial exploitation of strategic minerals through auctions conducted by the central government or state governments.
  • The goal is to promote domestic mining, reduce imports, and stimulate the establishment of related end-use industries like electric vehicles (EVs) and energy storage solutions.
  • The decision is also expected to generate employment in the mining sector.
  • These strategic minerals are considered crucial for India to fulfill its commitment to the energy transition and achieve net-zero emissions by 2070.

-Source: The Hindu

December 2023