Why in News?
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi 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).

What is Rate of Royalty?
Royalty rates are fees paid to the government for the extraction of minerals or resources from a specified area. 2nd Schedule of MMDRA 1957 deals with the royalty rates of minerals.

Approval of the Union Cabinet of specification of rate of royalty will enable the Central Government to auction blocks for Lithium, Niobium and REEs for the first time in the country. Royalty rate on minerals is an important financial consideration for the bidders in auction of blocks. Further, manner for calculation of Average Sale Price (ASP) of these minerals has also been prepared by the Ministry of Mines which will enable determination of bid parameters.

Recently, the Mines and Minerals (Development and Regulation) Amendment act, 2023 was passed by the Parliament, which has come into force from 17th August, 2023. The Amendment, among other things, delisted six minerals, including Lithium and Niobium, from the list of atomic minerals, thereby allowing grant of concessions for these minerals to private sector through auction. Further, the amendment provided that mining lease and composite license of 24 critical and strategic minerals (which are listed in Part D of the First Schedule of the Act), including Lithium, Niobium and REEs (not containing Uranium and Thorium), shall be auctioned by the Central Government.

Critical minerals have become essential for economic development and national security in the country. Critical minerals such as Lithium and REEs have gained significance in view of India’s commitment towards energy transition and achieving net-zero emission by 2070. Lithium, Niobium and REEs have also emerged as strategic elements due their usages and geo-political scenario. Encouraging indigenous mining would lead to reduction in imports and setting up of related industries and infrastructure projects. The proposal is also expected to increase generation of employment in the mining sector.

Geological Survey of India (GSI) has recently handed over the exploration report of REE and Lithium blocks. Further, GSI and other exploration agencies are conducting exploration for critical and strategic minerals in the country. The Central Government is working to launch the first tranche of the auction of critical and strategic minerals such as Lithium, REE, Nickel, Platinum Group of Elements, Potash, Glauconite, Phosphorite, Graphite, Molybdenum, etc. shortly.