The Indian government has taken a significant step towards enhancing its strategic minerals sector by approving an amendment to specify competitive royalty rates for mining three vital minerals: lithium, niobium, and rare earth elements (REEs). This move follows the removal of these minerals from the list of ‘specified’ atomic minerals, signaling the government’s intent to involve the private sector in mining through auctioning concessions for these critical resources.
The decision to amend the royalty rates aligns India with global benchmarks and paves the way for the commercial exploitation of these minerals through auctions, which can be conducted at both the central and state levels. This competitive royalty rate is expected to attract bidders to future auctions, encouraging domestic mining and reducing the need for imports.
Lithium, a crucial ingredient in rechargeable lithium-ion batteries used in electric vehicles, laptops, and mobile phones, has gained particular attention. In February, a significant lithium resource of 5.9 million tonnes was discovered in Jammu & Kashmir, making it the largest deposit of this white alkali metal in India. This discovery holds immense potential for India’s efforts to become self-reliant in lithium production.
The amendment specifies new royalty rates for these minerals. Lithium mining will now attract a royalty of 3% based on the London Metal Exchange price, while niobium will also be subject to a 3% royalty calculated on the average sale price (ASP), covering both primary and secondary sources. REEs will have a royalty of 1% based on the ASP of Rare Earth Oxide, the ore where REEs are commonly found.
The Ministry of Mines has outlined the method for calculating the ASP of these minerals, which will serve as the basis for determining bid parameters. The government’s goal is to encourage domestic mining and establish related end-use industries, such as electric vehicles (EVs) and energy storage solutions. These strategic minerals are seen as essential for India to fulfill its commitment to the global energy transition and achieve net-zero emissions by 2070.
India’s push for lithium exploration extends beyond Jammu & Kashmir, with efforts to extract lithium from brine pools in Rajasthan and Gujarat and the mica belts in Odisha and Chhattisgarh. This initiative is not only driven by the need for self-sufficiency but also by the desire to reduce dependence on China, a major source of lithium-ion energy storage products imported into India.
Furthermore, the focus on REEs is critical for the EV supply chain, as they are used in the motors rather than the batteries. REEs, such as neodymium, terbium, and dysprosium, are essential components in permanent magnet motors, which play a vital role in electric vehicles.
The amendment to specify competitive royalty rates for these minerals reflects India’s commitment to building a robust domestic supply chain for critical resources. By encouraging domestic mining and reducing reliance on imports, India aims to strengthen its position in the global green technology sector and contribute to a sustainable and self-reliant future.