Cabinet Approves Royalty Rates for Mining of Critical Minerals – Lithium, Niobium, and Rare Earth Elements (REEs)
TFP Bureau, New Delhi, Oct 11, 2023: In a significant move, the Union Cabinet, chaired by Prime Minister Shri Narendra Modi, has approved the amendment of the Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) to determine royalty rates for three critical and strategic minerals, namely Lithium, Niobium, and Rare Earth Elements (REEs).This development comes following the recent passage of the Mines and Minerals (Development and Regulation) Amendment Act, 2023 by the Parliament, which became effective on August 17, 2023. Among its notable changes, the Amendment delisted six minerals, including Lithium and Niobium, from the category of atomic minerals. Consequently, it opened the doors for the private sector to participate in the mining of these minerals through auctions.
The Amendment Act also mandated that the mining lease and composite license for 24 critical and strategic minerals, listed under Part D of the First Schedule of the Act, including Lithium, Niobium, and REEs (excluding Uranium and Thorium), would be auctioned by the Central Government.Today’s Cabinet approval to specify royalty rates marks a significant milestone, as it will facilitate the first-ever auction of Lithium, Niobium, and REE blocks in India. Royalty rates are a critical financial consideration for bidders in the auction process.
The Ministry of Mines has also developed the methodology for calculating the Average Sale Price (ASP) of these minerals, which will serve as a key determinant in the bidding process.Under the current provisions, the Second Schedule of the MMDR Act dictates that minerals lacking specific royalty rates shall be subject to a default royalty rate of 12% of the ASP. This rate is notably higher when compared to other critical and strategic minerals, making it non-competitive on the global stage.
To address this discrepancy, the Cabinet has determined reasonable royalty rates for the mentioned minerals:
1. Lithium : A royalty rate of 3% of the London Metal Exchange price.
2. Niobium : – A royalty rate of 3% of the Average Sale Price, covering both primary and secondary sources.
3. REE : A royalty rate of 1% of the Average Sale Price of Rare Earth Oxide.
These minerals have assumed a significant role due to their applications, economic importance, and geo-political relevance. As part of India’s commitment to energy transition and achieving net-zero emissions by 2070, minerals like Lithium and REEs are crucial. Encouraging domestic mining of these minerals is expected to reduce imports and promote related industries and infrastructure development. Additionally, the proposal is anticipated to boost employment opportunities in the mining sector.The Geological Survey of India (GSI) has already delivered the exploration report for REE and Lithium blocks.
Furthermore, the GSI and other exploration agencies are actively engaged in exploring critical and strategic minerals across the country. The Central Government is now preparing to launch the first round of auctions for critical and strategic minerals like Lithium, REE, Nickel, Platinum Group of Elements, Potash, Glauconite, Phosphorite, Graphite, Molybdenum, and more in the near future.
This move is set to have a far-reaching impact on India’s mining sector and the nation’s drive for self-sufficiency in critical minerals.
