Cabinet approves royalty rates for lithium, two other strategic minerals

The Centre on Wednesday said it has approved royalty rates of 3% each for lithium and niobium and 1% for Rare Earth Elements (REEs).

The decision on the royalty rates for the three critical and strategic minerals was taken by the Union Cabinet chaired by Prime Minister Narendra Modi, according to an official statement.

The approval by the Cabinet will enable the Centre to auction lithium, niobium and REE blocks for the first time in the country, it said.

The royalty rate on minerals is an important financial consideration for bidders during auction of mines.

Further, the method for calculating Average Sale Price (ASP) of these minerals has also been prepared by the Centre which will allow determining of bid parameters.

"The Union Cabinet... approved amendment of Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) for specifying rate of royalty in respect of 3 critical and strategic minerals, namely, lithium, niobium and Rare Earth Elements," the mines ministry said in a statement.

Critical minerals have become important for the nation's economic development and national security. Lithium and REEs have gained significance keeping in mind the country's commitment towards energy transition and achieving net-zero emission by 2070.

"The Second Schedule of the MMDR Act provides royalty rates for various minerals...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. Thus, it is decided to specify a reasonable royalty rate of lithium, niobium and REE as...lithium 3% of London Metal Exchange price, niobium 3% of Average Sale Price (both for primary and secondary sources), REE 1% of Average Sale Price of Rare Earth Oxide," the ministry said.

The Cabinet decision is also expected to increase employment in the mining sector. Geological Survey of India and other agencies are conducting exploration for critical and strategic minerals in the country.

The Centre is working to launch the first round of the auction of critical and strategic minerals such as lithium, REE, nickel, platinum group of elements, potash, glauconite, phosphorite, graphite and molybdenum shortly.