Cabinet approves royalty rates for mining of Lithium, Niobium & REE

The Union Cabinet approved amendment of Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957 (‘MMDR Act’) for specifying rate of royalty in respect of 3 critical and strategic minerals, namely, Lithium, Niobium and Rare Earth Elements (REEs).

Mines and Minerals (Development and Regulation) Amendment Act, 2023:

• In August 2023, the Mines and Minerals (Development and Regulation) Amendment Act, 2023 (MMDR Act) was passed by Parliament, which came into force from August 17, 2023.

Government removed six minerals from the list of nuclear minerals:

• By this amendment, among other things, six minerals including lithium and niobium have been removed from the list of nuclear minerals.
• This will allow the private sector to award concessions for these minerals through auctions.

Government to auction mining leases and composite licenses of critical and strategic minerals:

• The amendment provides that mining leases and composite licenses of 24 critical and strategic minerals including lithium, niobium and REEs (without uranium and thorium) will be auctioned by the Central Government.
• The Union Cabinet's approval in terms of royalty rates will enable the central government to auction blocks for lithium, niobium and REE for the first time in the country.
• Royalty rates on minerals are an important financial consideration for bidders in auctioning blocks. Further, a system has also been devised by the Ministry of Mines for calculation of Average Selling Price (ASP) of these minerals, which will enable determination of bidding parameters.

Fixing royalty rates for minerals:

• The Second Schedule of the MMDR Act fixes royalty rates for various minerals. Item No. 55 of the Second Schedule provides that for minerals for which royalty rate has not been specifically provided, the royalty rate will be 12 percent of the Average Selling Price (ASP).
• Thus, if royalty rates are not specifically provided for Lithium, Niobium and REE, their default royalty rate will be 12 percent of ASP.
• Also, this royalty rate of 12 percent is not at par with other mineral producing countries.
• Thus, it has been decided to specify the appropriate royalty rate of Lithium, Niobium and REE as follows:
  • Lithium – three percent of the London Metal Exchange price,
  • Niobium – three percent of the average selling price (for both primary and secondary sources),
  • REE – a percentage of the average selling price of rare earth oxides

Importance of this decision of the government:

• Important minerals have become essential for economic development and national security in the country. Given India's commitment towards energy transition and achieving net-zero emissions by 2070, critical minerals such as lithium and REE have gained importance.
• Lithium, niobium and REEs have also emerged as strategic elements due to their uses and geopolitical landscape.

What will be the benefit of this?

• Encouraging indigenous mining will reduce imports and establish related industries and infrastructure projects.
• Dependence on its imports will reduce, which will further strengthen our economy.
• This proposal is also expected to increase employment in the mining sector.

What is the government's plan for the future?

• Geological Survey of India (GSI) has recently submitted the exploration report of REE and Lithium blocks.
• Apart from this, GSI and other exploration agencies are exploring important and strategic minerals in the country.
• The Central Government is working towards launching the first round of auction of critical and strategic minerals like Lithium, REE, Nickel, Platinum Group of Elements, Potash, Glauconite, Phosphorite, Graphite, Molybdenum etc. soon.

Lithium:

• Lithium has currently become the new 'white gold' as its demand is increasing due to its use in high-capacity rechargeable batteries.
• It is a soft and silvery white metal.
• It is the lightest metal and the lightest solid element under standard conditions.
• It is highly reactive and flammable, so it must be stored as mineral oil.
• Due to its strategic importance, Lithium is used in nuclear and other high-tech industries like electronics, telecommunication, information technology, space, defense etc.
• Lithium metal is used to make mixed metals.

Niobium:

• Niobium is a white metal that turns into various shades of blue, yellow and green when exposed to air and the elements.

Rare Earth Elements (REE):

• Rare-earth elements (REEs) are also called rare-earth metals or lanthanides.
• REEs are a group of 17 metallic elements. Apart from these 15 lanthanides, scandium and yttrium also come under the category of REE.

Production of REE in India:

• Adequate quantities of REEs are found in India. More than 5% of global REE reserves are found in India with over 7 million tonnes of REE reserves. India ranks fifth in the world in terms of its production.
• India began developing domestic REE production capacity in the 1950s.
• India established Indian Rare Earth Limited (IREL) for mining and processing of REEs.

Expected Questions for the Exams:

Q. 1. The Union Cabinet has approved an amendment to the Mines and Minerals (Development and Regulation) Act, 1957 to fix the royalty rates in respect of which minerals?

Answer – Lithium, Niobium and Rare Earth Elements (REE)

Q. 2. From which date has the government implemented the Mines and Minerals (Development and Regulation) Amendment Act, 2023?

Answer - In August 2023, the Mines and Minerals (Development and Regulation) Amendment Act, 2023 (MMDR Act) was passed by the Parliament, which came into force from August 17, 2023.

Q. 3. As per the provision made by the government, how many mining leases and composite licenses of total important and strategic minerals will be auctioned by the Central Government?

Answer – 24 Important and strategic minerals

Q. 4. According to the recent constitutional amendment, how many minerals have the government removed from the list of nuclear minerals?

Answer - The government has removed six minerals from the list of nuclear minerals.