The Union Cabinet has approved the amendment to the Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), setting reduced royalty rates for three critical and strategic minerals – lithium, niobium, and Rare Earth Elements (REEs) – used in the energy transition technologies.

The development paves the way for the inaugural auction of these mineral blocks with loyalty rates reduced by the Ministry of Mines from an elevated default rate of 12% of average selling (ASP) to 3% of the London Metal Exchange price for lithium, 3% of ASP (primary and secondary sources) for niobium, and 1% of ASP for rare earth oxide (REE).

Royalty rates on minerals are an important financial consideration for bidders in the auction of mineral blocks.

In August, the amended MMDR Act took effect, removing lithium, niobium, and REEs (except uranium and thorium) from the atomic minerals category. The amendment provided for granting mining leases and composite licenses of 24 critical and strategic minerals to the private sector for auction.

Critical minerals play a vital role in developing batteries for electric vehicles and energy storage, making them crucial for India to meet its energy transition and net-zero goals.

In September, the Union government introduced a 25% incentive on the approved project cost for exploration agencies to accelerate the discovery and extraction of critical minerals, reduce import dependence, and promote self-sufficiency.

Earlier in June, India unveiled a list of 30 critical minerals, including lithium, cobalt, and nickel. This development is expected to play an important role in formulating the required policies to ensure regulated extraction of these minerals essential for the growth of the renewable energy sector. The country has been depending on imports of such raw materials to develop renewable technologies domestically.

The Geological Survey of India recently handed over exploration reports of REE and lithium blocks to the state governments.