India’s Strategic Step: Government Rationalises Royalty Rates on Critical Minerals

In a landmark decision that underscores India’s push towards self-reliance in the clean energy and high-tech manufacturing sectors, the Union Cabinet led by Prime Minister Narendra Modi has approved the rationalisation of royalty rates for four vital minerals — Graphite, Caesium, Rubidium, and Zirconium. The move is aimed at promoting domestic exploration, reducing import dependency, and unlocking the potential of India’s mineral wealth that is crucial for green technologies and strategic industries.

Image from Moneycontrol

A Structural Shift in Royalty Regime

The newly approved royalty structure replaces the older, fixed-rate system with a dynamic ad valorem model — a percentage of the mineral’s average sale price (ASP). Under this system, Graphite with higher purity (80% or more fixed carbon) will attract a 2% royalty, while lower-grade Graphite will have a 4% rate. Caesium and Rubidium will be subject to a 2% royalty on the contained metal, and Zirconium will have the lowest at 1% of ASP.

This rationalisation not only brings transparency to mineral block auctions but also makes mining and production of these critical resources commercially viable. The reform follows the government’s broader strategy to revise outdated royalty systems that hindered private participation and slowed exploration in the sector.

The Strategic Significance of the Decision

These minerals are not mere industrial commodities — they are strategic enablers of modern life. Graphite forms the backbone of lithium-ion batteries used in electric vehicles, renewable energy storage, and consumer electronics. Caesium and Rubidium, though rare, are vital for atomic clocks, precision instruments, and advanced telecommunications. Zirconium, on the other hand, has indispensable applications in the nuclear industry, aerospace materials, and corrosion-resistant equipment.

By rationalising royalties, India is setting the stage to attract private investors and mining companies to explore and exploit these underutilised resources. The move also sends a strong signal to global markets that India intends to build its own critical mineral supply chain rather than depend on imports — especially from countries like China that currently dominate this domain.

Unlocking India’s Mineral Potential

The reform is expected to accelerate the ongoing sixth tranche of mineral block auctions, which includes Graphite, Caesium, Rubidium, and Zirconium reserves. Many of these blocks had remained unauctioned due to lack of clarity over royalty mechanisms. With this change, exploration firms will now have clearer financial visibility, boosting investor confidence and competition in bidding.

Furthermore, the government believes that mining these minerals will lead to the discovery of associated resources such as Lithium, Tungsten, and Rare Earth Elements (REEs), essential for clean energy technologies and advanced manufacturing. This, in turn, will help India emerge as a major player in the global critical minerals ecosystem.

Reducing Import Dependence

India currently imports over 60% of its Graphite requirement and remains heavily dependent on other nations for advanced minerals used in electronics, EVs, and nuclear industries. The rationalisation is thus not merely an economic reform but a strategic intervention aimed at achieving Atmanirbharta — self-reliance in critical mineral production.

By fostering domestic mining and refining capacity, the government seeks to mitigate risks from global supply disruptions, trade restrictions, and geopolitical uncertainties. With China’s continued monopoly over many rare minerals and increasing export limitations, this decision reflects India’s resolve to secure its own supply chain independence.

Challenges in Implementation

While the reform is a step in the right direction, experts caution that the road ahead remains complex. India’s mineral ecosystem still faces significant gaps — from limited exploration infrastructure to inadequate refining and processing capacity. Mining these minerals domestically is only part of the challenge; the true economic benefit lies in developing downstream industries that can refine, process, and convert these resources into high-value products.

Moreover, exploration-to-production transitions can take years, often entangled in environmental clearances, logistical hurdles, and regulatory delays. Hence, while the rationalisation creates a favourable policy environment, success will depend on seamless execution and strategic investment.

Global Context and Economic Implications

The timing of this decision is significant. Across the world, nations are racing to secure supplies of critical minerals needed for the clean energy transition. The European Union, the United States, and Japan have all launched strategic mineral policies to reduce their dependence on a few dominant producers.

India’s move positions it as an emerging participant in this global race. By ensuring competitive royalty rates and transparent auctions, the country can attract foreign direct investment (FDI), strengthen its industrial base, and enhance its bargaining power in global supply chains. The reform aligns with India’s vision of becoming a global hub for battery manufacturing, EV production, and renewable energy technology.

The MGMM Outlook

The Indian government’s move to rationalise royalty rates for critical minerals such as Graphite, Caesium, Rubidium, and Zirconium is a landmark step toward true economic and strategic independence. By introducing a transparent and flexible ad valorem royalty system, the reform makes domestic exploration more viable and attractive for investors. This change not only strengthens India’s clean energy and high-tech ambitions but also aligns perfectly with the vision of Atmanirbhar Bharat. As the world races to secure mineral supplies essential for EVs, batteries, and renewable energy, India is asserting its presence as a decisive player, reducing its dependence on imports and setting the foundation for long-term self-reliance.

The initiative is also a reflection of India’s growing foresight in securing future technologies and strategic industries. With clearer financial mechanisms and investor-friendly policies, mineral exploration and production are expected to accelerate, unlocking vast reserves that had remained underutilised for decades. This forward-looking approach positions India to become not just a participant but a leader in the global critical minerals ecosystem — ensuring that the nation’s rich geological potential translates into national strength, economic growth, and technological progress.

(Sources: Moneycontrol, Times of India, Economic Times)