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Picture Courtesy: Indian Express

Context:

The Union Government has revised royalty rates for four critical minerals—graphite, caesium, rubidium, and zirconium—to boost domestic exploration, reduce import dependency, and mitigate supply-chain risks. These minerals are essential for green technologies, including EVs, solar, batteries, electronics, and advanced manufacturing.

What are Royalty rates?

A legally fixed charge paid by miners to the government for each unit or value of mineral extracted.

It is part of the Mineral Concession Rules under the Mines and Minerals (Development and Regulation) Act (MMDR Act).

Types of Royalty Rates:

Ad Valorem Royalty (Percentage-based)

• Calculated as a percentage of the mineral’s sale value.
• Example: If royalty is 2% and the mineral sells at ₹10,000/tonne → royalty = ₹200/tonne. This system responds to market prices. 

Specific (Per-tonne) Royalty

• Fixed amount charged per tonne of mineral extracted, regardless of market price.
• Example: ₹500/tonne of graphite. This system does not adjust for price fluctuations. 

Why government is revising royalty rates?

• To encourage domestic exploration: High or unsuitable royalty rates made mining commercially unviable, particularly for minerals with low-grade deposits or fluctuating global prices.
  By rationalising rates, the government aims to attract: More bidders in auctions, Private investment and Advanced exploration companies.
• To reduce import dependence for critical minerals: India is 100% import-dependent for many minerals used in EV batteries, Solar panels, Semiconductors, Electronics, Defence systems. Revised, lower, and more realistic royalty rates make domestic production more viable, helping India build secure supply chains.
• To protect India from global supply-chain shocks: China controls 90% of global processing of critical minerals and has recently imposed export restrictions. Royalty reforms help India in diversifying supply, mitigate geopolitical risks, reduce exposure to China-centric bottlenecks.
• To improve auction participation: Low participation has been a major challenge: Out of 81 critical mineral blocks auctioned since 2023, only 34 found bidders.
• To align with global best practices: Countries with successful critical mineral strategies (US, Australia, Canada) use Lower royalties, Market-linked pricing, Incentives for exploration 

Current Status:

• The Union Cabinet has rationalised royalty rates for four critical minerals: graphite, caesium, rubidium, and zirconium. (Source: Ministry of Mines)
• In February 2024, the government specified royalty rates for 12 more strategic/critical minerals (like cobalt, tungsten, titanium, etc.) under the MMDR Act. (Source: Ministry of Mines)
• The MMDR Amendment Act, 2023, lists 24 critical minerals for auction under a new schedule, signalling a long-term push for resource independence. 

What are the structural challenges will still persist even after revising Royalty rates?

Geological uncertainty & limited exploration

• India has low exploration intensity (≈10% of its geology explored vs. 80–90% in developed mining nations).
• Critical minerals like lithium, REEs, cobalt, caesium, etc., often occur in complex geological settings.

High upfront costs

• Critical minerals mining requires advanced technology, long project cycles (10–15 years), and heavy investment.
• Lower royalties may improve economics but do not reduce technological or capital barriers. 

Environmental and Social Clearance Bottlenecks: Land acquisition, forest clearance, and community consent remain time-consuming and contentious. 

Limited domestic refining and processing capacity: India depends heavily on foreign refining, especially China, for lithium, graphite, REEs, and tungsten. 

Global supply chain dominance by few countries: China controls 60–90% of global processing for many critical minerals. This creates price volatility, export restrictions and geopolitical vulnerabilities. 

Conclusion:

While the revision of royalty rates marks an important step toward unlocking India’s critical mineral potential, it is only a partial solution to a deeply complex ecosystem. Royalty reforms may attract more bidders and improve mining economics, but India’s core challenges—limited exploration, weak processing capacity, technological dependence, regulatory delays, and global supply-chain vulnerabilities—remain largely unaddressed. For true mineral self-reliance, India must complement royalty rationalisation with deeper reforms across exploration, refining, R&D, environmental governance, and strategic partnerships, ensuring that mining translates into real industrial and strategic capability. 

Source: Indian Express