The Union Cabinet has recently given its consent to revise the 2nd Schedule of the Mines and Minerals (Development and Regulation) Act, 1957 (‘MMDR Act’). The amendment outlines the rate of royalty for three Critical and Strategic minerals – Lithium, Niobium, and Rare Earth Elements (REEs). This paves the way for the Central Government to auction blocks for these minerals for the first time within India.
The Mines and Minerals (Development and Regulation) Amendment act of 2023 was passed by the Parliament and initiated in August, 2023. The Act lifted six minerals from the atomic minerals list, including Lithium and Niobium, thereby enabling the private sector to gain concessions for these minerals via auction.
About Royalty Rates and Key Amendments
Mineral royalty refers to the payment that the government (as the sovereign owner) gains from allowing the extraction of mineral resources. India, as stated by the Centre for Social and Economic Progress (CSEP), has some of the world’s highest mineral royalty rates, posing challenges to the competitiveness of its mining industry.
The 2nd Schedule of the MMDR Act provides royalty rates for different minerals. The amendment substantially lowers the royalty rates for these minerals. For instance, Lithium mining will now attract a 3% royalty based on the London Metal Exchange price. Equivalently, Niobium will also be subject to a 3% royalty calculated on the Average Sale Price (ASP), irrespective of whether it is from primary or secondary sources. REEs will have a royalty of 1% based on the ASP of the Rare Earth Oxide.
This revised structure is intended to stimulate domestic mining and lower imports, leading to the establishment of related end-use industries such as Electric Vehicles (EVs) and energy storage solutions.
Significance of the Amendment
The amendment facilitates private sector participation by auctioning concessions for these minerals, given their delisting from ‘specified’ atomic minerals. Furthermore, by providing new royalty rates in line with global benchmarks, commercial exploitation of these minerals is encouraged via competitive auctions conducted either by the central government or states.
This move aims to stimulate domestic mining to reduce imports and foster the growth of end-use industries. It aligns with India’s commitment to achieving Net-Zero Emissions by 2070 while reducing reliance on China, a major source of lithium-ion energy storage products.
Key Points: Lithium, REEs, and Niobium
Lithium is a vital ingredient for rechargeable batteries used in various tech devices and electric vehicles. India’s current dependency on lithium imports has led to exploration efforts within various regions of the country. REEs are essential for electric vehicle motors but present a supply chain challenge as they are primarily sourced from China. Similarly, Niobium enhances the strength of alloys, making it useful in myriad applications such as jet engines, MRI scanner magnets, and more.
The Mining Sector in India: Current Scenario
The mining industry plays an essential role in the country’s economy, contributing about 2.5% to India’s GDP. As per World Mineral Production, 2016-20, British Geological Survey, India stands 4th globally in terms of iron ore production and ranks as the world’s 2nd largest coal producer.
India also holds a competitive advantage in production and conversion costs in steel and alumina. The country’s strategic location facilitates export opportunities to developing Asian markets. In 2023, India’s demand for minerals is projected to surge by 3%, driven by expanded electrification and overall economic growth.
In the UPSC Civil Services Examination, questions related to the mining industry’s contribution to India’s GDP and the inevitable environmental impact of coal mining are common.