The Union Government of India has recently updated the royalty rates for four significant critical minerals—graphite, caesium, rubidium, and zirconium. These minerals play a crucial role in the development of green energy technologies. This strategic move is intended to enhance domestic exploration, minimize reliance on imports, and fortify supply-chain security.
The approach towards graphite has shifted from a fixed per-tonne royalty system to an ad valorem structure. This new system imposes a 2% royalty on high-grade graphite (with over 80% fixed carbon content) based on the Average Sale Price (ASP), while lower-grade graphite is subject to a 4% royalty. Caesium and rubidium will each bear a 2% royalty, whereas zirconium's rate has been significantly reduced from 12% to 1%.
The ASP, which denotes the weighted average ex-mine price of minerals from non-captive mines, is published monthly by the Indian Bureau of Mines (IBM). For minerals lacking domestic pricing benchmarks, IBM utilizes data from the United States Geological Survey (USGS), converting it into INR. Experts suggest that the shift to ad valorem royalties makes the system more market-responsive and attractive to investors. As sale prices escalate with global demand, state revenues increase accordingly, ensuring fair value distribution.
This reform comes in the wake of prolonged export restrictions by China, which controls 90% of global critical mineral processing. These supply-chain disruptions have compelled India and other nations to diversify sources and stabilize domestic production capabilities.
India's ambitious goals for renewable energy and electric vehicles (EVs) are poised to significantly boost the demand for critical minerals, many of which the country currently imports entirely. The revised royalty rates are expected to attract more bidders and facilitate the unlocking of associated minerals like lithium, tungsten, and rare earth elements (REEs). However, progress remains modest, with only 34 of 81 critical mineral blocks receiving successful bids since auctions commenced in 2023.
Despite possessing substantial reserves, India's mining and processing capacities are constrained by policy gaps, technical limitations, and inadequate investments. The revised royalty rates are part of an ongoing series of reforms, following previous revisions covering minerals such as cobalt, indium, and titanium.
The newly implemented ad valorem rates are anticipated to:
India's critical mineral ecosystem still faces structural challenges that can't be addressed by royalty revisions alone. A study highlights several barriers, including regulatory gaps, limited private-sector incentives, and insufficient technical expertise.
India remains heavily dependent on imports for mineral processing. The country contributes only 3% of global processed output in minerals like copper, despite having significant smelting capacity. For rare earth elements, private participation was historically curtailed due to their classification as atomic minerals.
Expanding mining alone won't achieve self-reliance unless India also develops the capability to convert raw minerals into high-purity materials essential for batteries, semiconductors, and advanced manufacturing. For genuine strategic autonomy in EVs and electronics, India must cultivate a comprehensive domestic value chain encompassing mining and processing to mitigate import dependence and bolster supply-chain security.
Kutos : AI Assistant!
