Cabinet Greenlights Royalty Rates for Lithium, Niobium, and Rare Earth Elements Mining – A Boost for India’s Strategic Mineral Industry

October 11, 2023

In a pivotal move to bolster India’s strategic mineral industry, the Union Cabinet, led by Prime Minister Shri Narendra Modi, has given its seal of approval to amend the Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act). The amendment specifies royalty rates for three critical and strategic minerals – Lithium, Niobium, and Rare Earth Elements (REEs).

This decision comes on the heels of the recent passage of the Mines and Minerals (Development and Regulation) Amendment Act, 2023, which became effective on August 17, 2023. This amendment, among its various provisions, delisted six minerals, including Lithium and Niobium, from the list of atomic minerals, opening the door for private sector participation through auctions. Furthermore, it mandated the auctioning of mining leases and composite licences for 24 critical and strategic minerals listed in Part D of the First Schedule, including Lithium, Niobium, and REEs (excluding Uranium and Thorium), by the Central Government.

The Union Cabinet’s recent approval to specify the rate of royalty marks a significant milestone, as it allows the Central Government to conduct auctions for Lithium, Niobium, and REEs in India for the first time. The royalty rate plays a vital role in the financial considerations for auction bidders, and the Ministry of Mines has developed a method to calculate the Average Sale Price (ASP) for these minerals, aiding in determining bid parameters.

Reasonable Royalty Rates

The Second Schedule of the MMDR Act outlines royalty rates for various minerals. For minerals not specifically listed, Item No. 55 sets a default royalty rate of 12% of the ASP, which is relatively high compared to other critical and strategic minerals. To rectify this, reasonable royalty rates for Lithium, Niobium, and REEs have been specified as follows:

1. Lithium: 3% of the London Metal Exchange price
2. Niobium: 3% of the Average Sale Price (for both primary and secondary sources)
3. REE: 1% of the Average Sale Price of Rare Earth Oxide

These critical minerals have taken on increasing importance in India, aligning with the country’s commitment to energy transition and achieving net-zero emissions by 2070. Additionally, these minerals are strategically vital due to their usage and the evolving geopolitical landscape. Promoting domestic mining is expected to reduce imports and stimulate the development of related industries and infrastructure projects, thereby creating employment opportunities within the mining sector.

Mineral Exploration

The Geological Survey of India (GSI) recently presented an exploration report for REE and Lithium blocks. Multiple exploration agencies, including GSI, are actively engaged in exploring critical and strategic minerals across the country. The Central Government is gearing up to launch the initial round of auctions for critical and strategic minerals, including Lithium, REE, Nickel, Platinum Group of Elements, Potash, Glauconite, Phosphorite, Graphite, Molybdenum, and more in the near future.

This move is poised to strengthen India’s position in the global critical minerals market and secure its economic development and national security.