Empowering Mining: Cabinet Sets Royalty Rates for Lithium, Niobium, and REEs

Introduction:

In a significant move towards unlocking India’s vast mineral wealth, the Union Cabinet, led by Prime Minister Shri Narendra Modi, approved a game-changing amendment to the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act). The amendment, passed by the Parliament in 2023, introduces groundbreaking changes to the regulation of critical and strategic minerals in the country. In this blog, we’ll delve into the key aspects of this amendment and its implications for the Indian mining sector, economic development, and national security.

1. The MMDR Act Amendment 2023: A Paradigm Shift

The Mines and Minerals (Development and Regulation) Amendment Act,  2023, which became effective on August 17, 2023, marks a paradigm shift in the country’s mineral resource management. One of the most notable changes is the delisting of six minerals, including Lithium and Niobium, from the list of atomic minerals. This change paves the way for private sector participation through auctions, thus opening new avenues for investment and development.

2. Auctioning Critical and Strategic Minerals

The amendment also provides for the auctioning of mining leases and composite licenses for 24 critical and strategic minerals, including Lithium, Niobium, and Rare Earth Elements (REEs), excluding Uranium and Thorium. This momentous decision will enable the Central Government to auction mineral blocks for the very first time, setting the stage for vibrant competition in the mining sector.

3. Specifying Royalty Rates

Today’s approval by the Union Cabinet marks another significant step in this journey. The amendment empowers the Central Government to specify royalty rates for these critical minerals. Royalty rates are crucial financial considerations for bidders in mineral block auctions. High royalty rates can significantly impact the viability and profitability of mining operations.

4. Reasonable Royalty Rates for Critical Minerals

Given the unique nature of critical minerals and their importance in India’s energy transition and national security, the specified royalty rates are essential. The Second Schedule of the MMDR Act currently sets a default royalty rate of 12% of the Average Sale Price (ASP) for minerals not explicitly listed. This rate is relatively high and inconsistent with international standards. The new amendment establishes the following reasonable royalty rates:

– Lithium: 3% of the London Metal Exchange price

– Niobium: 3% of the Average Sale Price (both primary and secondary sources)

– Rare Earth Elements (REEs): 1% of the Average Sale Price of Rare Earth Oxide

5. The Significance of Critical Minerals

Critical minerals, particularly Lithium and REEs, have taken center stage in India’s quest for energy transition and commitment to achieving net-zero emissions by 2070. These minerals are strategically vital due to their unique applications and global geopolitical considerations. Encouraging domestic mining is expected to reduce imports and stimulate related industries and infrastructure projects, thereby generating employment in the mining sector.

6. Geological Survey and Exploration

The Geological Survey of India (GSI) has already delivered an exploration report for REE and Lithium blocks. Ongoing exploration efforts by GSI and other agencies are uncovering more potential sources of critical and strategic minerals in the country. The Central Government is gearing up to launch the first tranche of auctions for critical minerals like Lithium, REEs, Nickel, Platinum Group of Elements, Potash, Glauconite, Phosphorite, Graphite, Molybdenum, and more, promising a bright future for India’s mining industry.

Conclusion: Shaping India’s Mineral Future

The 2023 MMDR Act Amendment is set to revolutionize India’s mining sector. By allowing private sector participation, specifying reasonable royalty rates, and promoting domestic mining of critical minerals, it opens doors to unprecedented opportunities for economic growth and national security. As the country works towards a sustainable and green future, the strategic importance of Lithium, Niobium, and REEs cannot be overstated, making this amendment a significant milestone in shaping India’s mineral future.