Cabinet clears way for private sector participation in lithium, rare earth elements mining

The Centre on Wednesday approved the selling price as well as the royalty on lithium and rare earth elements (REEs) thereby enabling the first auction of their recently-discovered blocks and kept royalty at “reasonable” rates to encourage private sector participation in their commercial mining.

For lithium, the Cabinet approved a royalty rate of 3 percent based on the London Metal Exchange price chargeable on the “contained lithium metal” since the newly-discovered resources would require proper technology and quantum investment to profitably extract lithium from its ore.

The royalty on REE has been fixed at 1 percent of the average sale price of rare earth oxide (REO) chargeable on the REO contained in the produced ore. This is in line with the international practice where REE royalty is half of the royalty on ilmenite, rutile and zircon (2 percent).

Both lithium and REE were not exclusively specified in the Second Schedule of the Mines and Minerals (Development and Regulation) Act of 1957 which meant that they attracted royalty rates of 12 per cent. The new rates would be applicable for the next three years.

Wednesday’s fixation of average sale price and royalty would enable state governments to auction the newly-found blocks since ASP forms the basis of determining the bid parameters. Auction premium is quoted as a percentage of the ASP and royalty forms a financial consideration of the participants in the bidding.

The Mines Ministry had proposed that royalty may “initially be kept at a reasonable level” to encourage more participation. “In any case, usually additional payment over the royalty is quoted by the bidders as premium payable to the state government. Hence, a reasonable royalty rate would not adversely affect revenue earning for the state but would help in attracting interest in the auctions of the blocks.”

It said that in prescribing royalty for minerals to be mined for the first time in the country, factors such as ease in royalty administration, fair revenue to the states and investor interest to mine the minerals must be considered. “Encouraging indigenous mining of lithium and REE is in the national interest. It would lead to a reduction in imports and would also help in the efforts of making Atmanirbhar Bharat,” it argued.

India meets about 70 percent of its lithium - the key element for manufacturing electric vehicle batteries - through imports even as it seeks to increase the EV penetration from current 1 percent to 30 percent by 2030.

India depends on China and Hong Kong for about 70 percent of its lithium imports and more than 90 percent for lithium-ion. Australia is the world’s top lithium producer followed by the ‘Lithium Triangle’ of Argentina, Chile and Bolivia.

Recently, a deposit of bauxite, REE & lithium bearing mineral in G-3 category was discovered in Salal-Hamina areas of Reasi district of Jammu & Kashmir by Geological Survey of India (GSI). The estimated resource for lithium is 5.9 million tonnes. The deposit holds an estimated 13.2 million tonnes at an average grade of 33.9 percent alumina or aluminum oxide and 5.13 million tonnes of Titanium.

As for REE, Karnataka has informed that the Mincheri REE block in Raichur District was explored by GSI up to G3 level. Since the atomic minerals reported in this block are below the notified threshold value, the state government has been authorized to auction the block.

The geological report has confirmed presence of Yttrioflurite, Gadolite, Britholite, Cerianite, Barite, Allanite, Monazite and Bastanaesite. Ore reserve estimation yielded about 0.714 million tonnes of REE at cut-off grade of 0.1 percent, 0.620 million tonnes at 0.5 percent cut-off and 0.146 million tonnes at 1 percent cut-off.

GSI has also conducted exploration and finalised the geological reports for nine other blocks with three in Bihar, two each in Gujarat and Maharashtra, one each in Jharkhand and Uttar Pradesh.