Coal and Mining Sector

New Royalty Rates for Strategic Minerals, Lithium and REEs

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Critical Minerals

Mains level: Read the attached story

minerals

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.

Implications of the Amendment

  • 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.

Economic significance of the move

(A) Lithium

  • 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.

(B) Rare Earth Elements

  • 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.

(C) Niobium for Industry

  • 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.

Conclusion

  • 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.

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