New Royalty Rates for Lithium, Niobium and REE

New Royalty Rates for Lithium, Niobium and REE

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

Context:
• The changes enable competitive royalty rates for these strategically vital minerals (critical minerals) and open the doors to private sector participation through concession auctions.

Implications:
• It will bring India’s royalty rates in line with global standards
• 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.
• 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.
• Earlier 12% royalty rate for unspecified minerals was significantly higher than international benchmarks. The revised rates are 3% for lithium and niobium, and 1% for REEs, based on price benchmarks, will help enhance the attractiveness of mining in India.

Economic significance of the move:

Lithium
• 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 Odishaand Chhattisgarh’s mica belts.
• Reduced dependency on China
• Promote EV growth

Niobium
• 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.
• Niobium’s superconducting properties find applications in magnets for particle accelerators and MRI scanners. The main source of niobium is the mineral columbite, found in several countries, including Canada, Brazil, Australia, and Nigeria.

Rare Earth Elements
• 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.
• 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.

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.