Cabinet nod to 3% royalty rate for lithium, niobium mining

Prime Minister Narendra Modi-led Union Cabinet has approved changes in the law to specify the rate of royalty in the case of three “critical and strategic” minerals -- lithium, niobium, and rare earth elements (REEs). Today’s development will enable the Centre to auction blocks of lithium, niobium, and REEs the first time.

The royalty rate of lithium, niobium, and REE has been fixed at 3% of the London Metal Exchange price in the case of lithium; 3% of the average sale price, both for primary and secondary sources, for niobium; and 1% average sale price of rare earth oxide for REE.

Parliament had passed Mines and Minerals (development and regulation) Amendment Act, 2023, recently, and it came into force on August 17, 2023. The amendment delisted six minerals, including lithium and niobium, from the list of “atomic minerals”, thus opening them up for the private sector.

It also provides that the Centre can do mining leases and provide composite licenses of 24 critical and strategic minerals, including lithium, niobium, and REEs (not containing uranium and thorium).

The Centre says 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 therein shall be 12% 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% of ASP, which is considerably high as compared to other critical and strategic minerals. Also, this royalty rate of 12% is not comparable with other mineral-producing countries," the Cabinet says.

Critical minerals such as lithium and REEs have gained significance in view of India’s commitment to energy transition and achieving net-zero emissions by 2070. Lithium, niobium and REEs have also emerged as “strategic elements” due to their usages and geo-political scenario.

The royalty rate on minerals is an important financial consideration for the bidders in the auction of blocks. The manner for the calculation of the average sale price (ASP) of these minerals has also been prepared by the Centre, enabling the determination of bid parameters.

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

Among other Cabinet decisions, a statement says the Cabinet approved the establishment of an autonomous body 'Mera Yuva Bharat', which will benefit the youth in the age group of 15-29 years.

The Cabinet also approved an MoU between India and Papua New Guinea on cooperation in digital solutions implemented at population scale for digital transformation; an MoU between India and France on cooperation in digital technologies; and an MoU between India and Trinidad and Tobago in digital solutions implemented at population scale for digital transformation.