On 11th October (Wednesday), the Union Cabinet chaired by Prime Minister Narendra Modi approved the amendment of the Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957 (‘MMDR Act’). This would specify the rate of royalty with respect to 3 critical and strategic minerals, namely, Lithium, Niobium, and Rare Earth Elements (REEs), a PIB statement said.
The rate of royalty fixed for these critical and strategic minerals is as follows –
(i) Lithium – 3% of London Metal Exchange (LME) price,
(ii) Niobium –3% of the Average Sale Price (both for primary and secondary sources),
(iii) Rare Earth Elements – 1% of the Average Sale Price of Rare Earth Oxide
The Cabinet’s decision to specify the rate of royalty for these minerals will enable the Central Government to auction blocks for Lithium, Niobium, and REEs for the first time in the country.
Taking to X, Union Minister for Coals and Mines, Pralhad Joshi highlighted that this decision will allow the central government, for the first time, to auction these minerals. He also added that this decision will attract active participation from the bidders and boast the economic activities that are dependent on these minerals in the coming days.
The cabinet headed by Prime Minister Shri @narendramodi Ji has approved royalty rates for 3 critical minerals, including Lithium and Niobium. This decision will allow the central government, for the first time, to auction these minerals. This will not only attract active… pic.twitter.com/ABvoB58izO
— Pralhad Joshi (@JoshiPralhad) October 11, 2023
Hailing the decision, PM Modi stated, “Today’s Cabinet decision is great news for the sector and will also boost economic activities.”
Today's Cabinet decision is great news for the sector and will also boost economic activities. https://t.co/jjOoe21VRc https://t.co/drWItXTUfW
— Narendra Modi (@narendramodi) October 11, 2023
It is important to note that the royalty rate on minerals is believed to be one of the important financial considerations for the bidders in the auction of blocks. Further, the Ministry of Mines has also prepared the manner for calculation of the Average Sale Price (ASP) of these minerals which will enable the determination of bid parameters.
Recently, the Mines and Minerals (Development and Regulation) Amendment Act, 2023 was passed by the Parliament. Subsequently, it came into force on 17th August 2023.
The Amendment delisted six minerals which included Lithium and Niobium, from the list of atomic minerals. With this, it allowed the grant of concessions for these minerals to the private sector through auction.
Further, the amendment allowed the Central Government to auction the mining lease and composite license of 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).
Notably, the royalty rates for various minerals are provided in the Second Schedule of the MMDR Act. Under the previous rule, if royalty rates for certain minerals weren’t mentioned specifically, they were set at 12% of the Average Sale Price (ASP) which would have pegged the royalty rate for Lithium, Niobium, and REE at 12% of the ASP, the default royalty rate. However, this royalty rate of 12% would not have been comparable with other mineral-producing countries and was considerably high compared to other critical and strategic minerals.
Further, the Geological Survey of India (GSI) and other exploration agencies have been conducting explorations to find critical and strategic minerals in the country and has
recently handed over the exploration report of REE and Lithium blocks.
The government is planning to soon start auctioning critical and strategic minerals like Lithium, REE, Nickel, Platinum Group of Elements, Potash, Glauconite, Phosphorite, Graphite, Molybdenum, and others.
Critical minerals have now become indispensable for the country’s economic growth and national security. Minerals like Lithium and REEs, in particular, have gained immense importance in line with India’s dedication to energy transition and achieving net-zero emissions by 2070. The strategic significance of minerals such as Lithium, Niobium, and REEs has grown due to their various applications and the geopolitical landscape. Promoting domestic mining would reduce the need for imports and pave the way for the development of associated industries and infrastructure projects. Moreover, this proposal is anticipated to boost employment opportunities in the mining sector.
