Cabinet approves royalty rates for mining of Lithium, Niobium and Rare Earth Elements

Recently, an amendment to the MMDR Act was passed by the Parliament, which has come into force from 17th August 2023.

The amendment, among other things, 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, including Lithium, Niobium and REEs (not containing Uranium and Thorium), will be auctioned by the Central Government.

Today’s approval of the Union Cabinet of the specification of the rate of royalty will enable the Central Government to auction blocks for Lithium, Niobium and REEs for the first time in the country, said the ministry.

The royalty rate on minerals is an important financial consideration for the bidders in the auction of blocks.

Further, the manner for calculation of the Average Sale Price (ASP) of these minerals has also been prepared by the Ministry of Mines which will enable the determination of bid parameters.

The MMDR Act's Second Schedule sets royalty rates for different minerals. For minerals not listed, like Lithium, Niobium, and REE, the default rate is 12% of the Average Sale Price (ASP). This is higher than rates for similar strategic minerals. The 12% rate is also quite high compared to other mineral-producing countries, according to the ministry

Considering these, the ministry said the government has set a reasonable royalty rate for Lithium, Niobium, and REE as below:

(i) Lithium – 3% of London Metal Exchange price,

(ii) Niobium –3% of Average Sale Price (both for primary and secondary sources),

(iii) REE- 1% of the Average Sale Price of Rare Earth Oxide   

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 to 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.

Geological Survey of India (GSI) has recently handed over the exploration report of REE and Lithium blocks. Further, GSI and other exploration agencies are conducting exploration for critical and strategic minerals in the country.

The Central Government is working to launch the first tranche of the auction of critical and strategic minerals such as Lithium, REE, Nickel, Platinum Group of Elements, Potash, Glauconite, Phosphorite, Graphite, Molybdenum, etc., shortly.