Lithium, Niobium, and Rare Earth Elements (REEs) are three critical and strategic minerals that have been approved for amendment to the Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957 (the “MMDR Act”) by the Union Cabinet, which is presided over by Prime Minister Shri Narendra Modi.
Recently, the Mines and Minerals (Development and Regulation) Amendment act, 22023 was passed by the Parliament, which has come into force from 17th 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 Central Government will be able to auction blocks for lithium, niobium, and REEs for the first time in the nation thanks to the Union Cabinet’s acceptance of the specification of royalty rate today. The royalty rate on minerals is a significant financial factor for bidders in block auctions. The Ministry of Mines has also developed a method for calculating the Average Sale Price (ASP) of these minerals, which will make it possible to decide on the bid specifications.
The MMDR Act’s Second Schedule lists the royalty rates for specific minerals. The Second Schedule’s item No.55 states that the average sale price (ASP) will be used as the royalty rate for minerals whose royalty rate is not specifically stated therein. 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. Thus, it is decided to specify a reasonable royalty rate of Lithium, Niobium and REE as below:
(i) Lithium – 3% of London Metal Exchange price,
(ii) Niobium –3% of Average Sale Price (both for primary and secondary sources),
(iii) REE- 1% of Average Sale Price of Rare Earth Oxide
Essential minerals are now necessary for the nation’s economic growth and security. Lithium and REEs, two essential minerals, have become more important in light of India’s commitment to an energy transition and achieving net-zero emissions by 2070. Due to their use and the geopolitical environment, lithium, niobium, and REEs have also become strategic elements. Encouragement of domestic mining would result in a decrease in imports as well as the establishment of linked enterprises and infrastructural initiatives. The initiative is also anticipated to enhance employment creation in the mining industry.
The exploration report for the REE and Lithium blocks was just delivered by the Geological Survey of India (GSI). In addition, the nation’s important and strategic minerals are being explored by GSI and other organisations. The first phase of the auction for important and strategic minerals, including lithium, rare earth elements, nickel, platinum group elements, potash, glauconite, phosphorite, graphite, molybdenum, etc., will soon be launched by the central government.
