New rates, old challenges: Can royalty tweaks fix bottlenecks in India's critical minerals sector?, Pg22

Key Highlights:

• The government has approved revised royalty rates for graphite, caesium, rubidium, and zirconium to boost domestic exploration and reduce import dependence.
• Graphite royalty shifts to an ad valorem system, with rates of 2% or 4% based on carbon content, while caesium and rubidium will draw 2% royalty each, and zirconium 1%.
• The move aims to counter China's control over critical mineral processing and diversify supply chains amid rising demand for minerals in renewable energy and EV sectors.
• Since 2023, only 34 out of 81 critical mineral blocks put up for auction have found successful bidders, highlighting policy and capacity challenges.

Detailed Insights:

• The shift to an ad valorem royalty system, tied to the Average Sale Price (ASP) published by the Indian Bureau of Mines (IBM), aims to make the royalty system responsive to demand-supply dynamics.
• China's export restrictions on critical minerals have prompted countries like India to diversify supplies, given China's 90% control over global critical mineral processing.
• India is heavily import-dependent for minerals like cobalt, lithium, nickel, and rare earth elements (REEs), crucial for batteries, solar, semiconductors, and advanced electronics.
• The government hopes revised royalty rates will attract more bidders for auctions and unlock associated minerals like lithium, tungsten, rare earths, and niobium, but progress has been slow due to policy and investment constraints.
• India defines "critical minerals" as essential for economic development and national security, but caesium and rubidium are not included in India's list of 30 critical minerals, despite being considered critical by the US, Canada, and South Korea.
• Royalty rates for 12 critical and strategic minerals were revised in February 2024, and further revisions for lithium, niobium, and rare earth elements were notified in October 2023.

Key Concepts Involved:

• Royalty Rate: A fee paid to the government for the right to extract minerals from a specific area.
• Ad Valorem: A royalty system where the fee is a percentage of the mineral's sale value.
• Critical Minerals: Minerals essential for economic development and national security, subject to supply-chain risks.