Union Cabinet Approves 3% Royalty Rates For Lithium, Niobium, 1% For Rare Earth Elements

The government also prepared the method to calculate the Average Sale Price (ASP) of these minerals, which will facilitate how to determine the bid parameters.

The Central Government said on Wednesday that it approved royalty rates for three strategic minerals, lithium, niobium, and Rare Earth Elements (REEs). As per the decision taken by the Union Cabinet presided over by Prime Minister Narendra Modi, the government authorised royalty rates of 3 per cent each for lithium and niobium and 1 per cent for Rare Earth Elements. 

This authorisation by the Cabinet will allow the Centre to begin auctions for these mineral blocks for the first time, reported PTI. Notably, the royalty rate on minerals is a crucial financial consideration for bidders during mine auctions. The government also prepared the method to calculate the Average Sale Price (ASP) of these minerals, which will facilitate how to determine the bid parameters. 

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

Critical minerals have recently become crucial for the country’s economic development and national security. Lithium and REEs have become important with respect to the country’s commitment towards energy transition and reaching net-zero emissions by 2070. 

The ministry added, “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 per cent of ASP, which is considerably high as compared to other critical and strategic minerals. Also, this royalty rate of 12 per cent 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 per cent  of the London Metal Exchange price, niobium 3 per cent of the Average Sale Price (both for primary and secondary sources), REE 1 per cent of Average Sale Price of Rare Earth Oxide.”

This decision from the government is further expected to generate employment in the mining sector. The Geological Survey of India and other agencies are currently undertaking explorations for critical and strategic minerals in the country.