Cabinet okays royalty rates for lithium, niobium

New Delhi: The Union government on Wednesday approved royalty rate for lithium, niobium, and for Rare Earth Elements (REEs). For lithium and niobium a royalty rate of 3% each has been fixed, while for Rare Earth Elements (REEs), the rate has been set at 1%. "The Union Cabinet chaired by Prime Minister Shri Narendra Modi approved the 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 - lithium, niobium and Rare Earth Elements," the Ministry of Mines said in a statement.

The royalty rate approval will allow the Centre to auction lithium, niobium and REEs blocks for the first time in the country, it added. The Mines and Minerals (Development and Regulation) Amendment Act, 2023, came into force 17 August 2023. The amendment, among other things, delisted six minerals, including lithium and niobium, from the list of atomic minerals, thereby allowing grant of concessions for these minerals to private sector through auction.

Further, the amendment provided that 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), shall be auctioned by the central government.

The rate of royalty rate on minerals is crucial for auctions. Also, the Ministry of Mines has devised a method to calculate the average sale price (ASP) of these minerals, which will help in determining bid parameters.

Prior to the amendment, the Second Schedule of the MMDR Act mandated a royalty rate of 12% of ASP for all minerals not specifically provided a royalty rate, making them non-competitive and not on a par with global standards. Therefore, it was decided to specify a reasonable royalty rate of lithium, niobium and REEs.

The 3% royalty for lithium is based on prices at London Metal Exchange price. For niobium, the royalty has been calculated from the ASP, considering both primary and secondary sources, and REEs' royalty is based on the ASP of Rare Earth Oxide Critical minerals have become essential for economic development and national security. Lithium and REEs have gained significance in view of India’s commitment towards energy transition and achieving the target of net-zero emissions by 2070.