Central Idea

The Centre has approved royalty rates of 3% each for lithium and niobium and 1% for Rare Earth Elements (REEs).
These changes enable competitive royalty rates for these strategically vital minerals (critical minerals) and open the doors to private sector participation through concession auctions.

What are Critical Minerals?

Critical minerals are elements that are crucial to modern-day technologies and are at risk of supply chain disruptions.
These minerals are used in making mobile phones, computers, batteries, electric vehicles, and green technologies like solar panels and wind turbines.
Minerals such as antimony, cobalt, gallium, graphite, lithium, nickel, niobium, and strontium are among the 22 assessed to be critical for India.
Many of these are required to meet the manufacturing needs of green technologies, high-tech equipment, aviation, and national defence.

Alignment with Global Benchmarks: The amendments, involving specifying new royalty rates, bring India’s royalty rates in line with global standards. This is crucial to attract bidders’ in future mineral auctions.
Competitive Royalty Rates: The Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957, previously set a 12% royalty rate for unspecified minerals, which was significantly higher than international benchmarks. The revised rates are 3% for lithium and niobium, and 1% for REEs, based on price benchmarks, enhancing the attractiveness of mining in India.
Domestic Mining Promotion: Lower royalty rates and commercial exploitation opportunities aim to encourage domestic mining, reduce imports, and stimulate related industries like electric vehicles (EVs) and energy storage solutions.
Energy Transition Commitment: Access to critical minerals is integral to India’s commitment to energy transition and achieving net-zero emissions by 2070, aligning with global environmental goals.

Import Dependence: India currently imports all its required lithium. The government’s push for lithium mining extends beyond Jammu & Kashmir to explore lithium extraction from Rajasthan and Gujarat’s brine pools, as well as Odisha and Chhattisgarh’s mica belts.
Economic Offensive: This initiative is part of India’s economic strategy to reduce dependency on China for lithium-ion energy storage products, given China’s dominant position in the market.
EV Growth: With EVs on the cusp of disruption, securing a lithium supply chain is strategically vital. The global lithium battery market has seen significant growth in recent years.

Global Supply Challenges: Rare earth elements, primarily sourced from or processed in China, pose challenges in the EV supply chain. Securing supplies can be difficult, and China’s dominance has raised concerns.
Usage in Motors: Rare earth elements are crucial in EV motors, particularly permanent magnet motors. Elements like neodymium, terbium, and dysprosium are used in magnets for generating a constant motor flux, enhancing motor efficiency.
Environmental Concerns: Mining rare earth elements often involves environmentally damaging open-pit operations, raising environmental and ecological concerns.

Corrosion Resistance: Niobium, known for its resistance to corrosion due to a surface oxide layer, is used in various industries. It strengthens alloys, particularly stainless steel, making them ideal for applications in aerospace, construction, and pipelines.
Superconducting Properties: Niobium’s superconducting properties find applications in magnets for particle accelerators and MRI scanners.
Global Sources: The main source of niobium is the mineral columbite, found in several countries, including Canada, Brazil, Australia, and Nigeria.

India’s decision to amend mining laws for strategic minerals is a significant step toward aligning with global standards, promoting domestic mining, and securing supplies for emerging industries like EVs and energy storage.
It underscores India’s commitment to sustainable energy transition and reduced import dependency while addressing environmental concerns in mining rare earth elements.