New Delhi: The Union Cabinet has approved on Wednesday an amendment to the Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957 (‘MMDR Act’) for specifying the rate of royalty for three critical and strategic minerals — Lithium, Niobium and Rare Earth Elements (REEs). The government has plans to auction mineral mining blocks this year for the first time, therefore, it was necessary that the government reduce the royalty rates to attract private players to the bidding process.
Accordingly, the government has also announced the rates of royalty for these three minerals. While Lithium will have royalty rate of 3 percent of the London Metal Exchange price, Niobium will be 3 percent of the Average Sale Price (both for primary and secondary sources) and REE will be 1 percent of the Average Sale Price of Rare Earth Oxide.
“Today’s approval of the Union Cabinet of the 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 the Average Sale Price (ASP) of these minerals has also been prepared by the Ministry of Mines which will enable determination of bid parameters,” said the Ministry of Mines in an official statement.
Recently, the Mines and Minerals (Development and Regulation) Amendment Act, 2023 was passed by the Parliament and came into force on August 17 this year. 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 mining leases and composite licenses for 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.
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 shall be 12 percent 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 percent of ASP, which is considerably high as compared to other critical and strategic minerals. Also, this royalty rate of 12 percent is not comparable with other mineral-producing countries.
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. This can be gauged from the fact that India has identified and recently released its list of critical minerals. Lithium, Niobium and REEs have emerged as strategic elements due their usages and the geo-political scenario in the critical mineral value chain. 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.
The 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.