New royalty rates for strategic minerals

Why in the News?

The centre has recently approved royalty rates of 3% each for lithium and niobium and 1% for Rare Earth Elements (REEs).

What does the new royalty rates imply?

1. The Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) was amended to specify the rate of royalty in respect of 3 critical and strategic minerals, namely, lithium, niobium and Rare Earth Elements.
2. It will enable the Centre to auction lithium, niobium and REE blocks for the first time in the country.
3. The royalty rates, an important financial consideration, shall benefit the bidders during auction of mines.
4. The centre can determine the bid parameters as they develop the method for calculating Average Sale Price (ASP) of these minerals.
5. Without exclusively mentioning the royalty rates for lithium, niobium and REE, its default royalty rate would be 12% of ASP which is considerably high as compared to other critical and strategic minerals.
6. Therefore, a reasonable royalty rate has been specified:
   1. Lithium- 3% of London Metal Exchange price
   2. Niobium- 3% of Average Sale Price (both for primary and secondary sources)
   3. REE- 1% of Average Sale Price of Rare Earth Oxide
7. The move is also expected to increase employment in the mining sector by encouraging domestic mining and lower imports.
8. It shall also provide impetus to set up related end-use industries such as electric vehicles (EVs) and energy storage solutions, which shall act as a prerequisite for India to meet its commitment to energy transition, and to achieve net-zero emissions by 2070.
9. The Centre is planning to launch the 1^st round of the auction of critical and strategic minerals such as lithium, REE, nickel, platinum group of elements, potash, glauconite, phosphorite, graphite and molybdenum shortly.

Push for Lithium:

1. India currently imports all the lithium needs.
2. The domestic exploration push for lithium is now focused on
   1. J&K
   2. Brine pools of Rajasthan and Gujarat
   3. Mica belts of Odisha and Chhattisgarh.
3. The push is also perceived to be a stepped-up economic offensive against China, a major source of lithium-ion energy storage products that are imported into the country.

REEs value chain & Niobium:

1. The rare earths are either sourced from or processed in China, and it can be difficult to secure supplies, thus constituting another hurdle in the EV supply chain.
2. In EV, REE are used not in batteries, but as magnets in motors that are made with REEs such as neodymium, terbium, and dysprosium.
3. Niobium:
   1. It is a silvery metal with a layer of oxide on its surface, which makes it resistant to corrosion. 
   2. It is used in alloys, including stainless steel, to improve their strength, particularly at low temperatures.
   3. Alloys containing niobium are used in jet engines, beams and girders for buildings, and oil and gas pipelines.
   4. It is also used in magnets for particle accelerators and MRI scanners because of its superconducting properties.
   5. The main source of this mineral is the mineral columbite, which is found in countries such as Canada, Brazil, Australia, and Nigeria.

About:

What are critical minerals?

1. Critical minerals refer to mineral resources, both primary and processed, which are essential inputs in the production process of an economy, and whose supplies are likely to be disrupted on account of non-availability or risks of unaffordable price spikes.
2. These minerals lack substitutability and recycling processes.
3. The availability risks occur due to global concentration of extraction and processing activities, the governance regimes, and environmental footprints in resource abundant countries.
4. These minerals are crucial for the high-tech products required for clean energy, national defence, informational technology, aviation, and space research,
5. India needs critical minerals to meet its climate change mitigation objectives
6. The country must focus on securing supply chains (exploration, mining, processing, and manufacturing) for critical minerals and acquiring foreign mineral assets to ensure their continuous supply.
7. India’s transitions towards renewable power generation and electric vehicles shall increase the demand for several minerals such as copper, manganese, zinc, and indium.
8. India does not have reserves of nickel, cobalt, molybdenum, rare earth elements, neodymium and indium,
9. The country’s requirement of copper and silver are higher than its current reserve.
10. Enhanced domestic mineral exploration and extraction has to be carried out to ensure uninterrupted supplies of critical minerals, with particular attention to deep-seated minerals.