The Central Government will be able to auction blocks for lithium, niobium, and rare earth elements (REEs) for the first time in the nation thanks to the Union Cabinet’s acceptance of the specification of the 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

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  Narendra Modi.

Recently, the Parliament approved the Mines and Minerals (Development and Regulation) Amendment Act, 2023; it will take effect on 17 August 2023. The Amendment allowed for the grant of concessions for these minerals to the private sector through auction, among other things by delisting six minerals from the list of atomic minerals, including lithium and niobium.

The amendment also stated that the Central Government would auction off mining leases and composite licences for 24 critical and strategic minerals (listed in Part D of the First Schedule of the Act), including lithium, niobium, and REEs (not containing uranium and thorium).

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 the 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. Lithium, niobium, and REE would therefore have a default royalty rate of 12 per cent of ASP if it wasn’t specified, which is far higher than that of other vital and strategic minerals. Additionally, this 12 per cent royalty rate is not similar to that of other nations that produce minerals.

As a result, it is decided to designate the following as a suitable royalty rate for lithium, niobium, and REE. Lithium is priced at 3 per cent of the London Metal Exchange, niobium accounts for 3 per cent of the average sale price (both from main and secondary sources), and REE is 1 per cent of the Rare Earth Oxide’s average sale price.

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.