REAR EARTH ELEMENTS

The Indian government has recently amended a key law, enabling the specification of competitive royalty rates for the mining of three strategically significant minerals: lithium, niobium, and rare earth elements (REEs). This decision comes after the removal of six minerals from the list of 'specified' atomic minerals, paving the way for private-sector participation through the auctioning of mining concessions.

2. About the Minerals

• Lithium is a soft, silvery-white alkali metal, lithium is a crucial component of rechargeable lithium-ion batteries, powering electric vehicles, laptops, and mobile phones. India recently discovered a significant lithium deposit in Jammu and Kashmir.
• Niobium is a light grey, crystalline metal with a resistance to corrosion due to a layer of oxide on its surface. It is utilized in strengthening stainless steel alloys and found in applications like jet engines, structural beams, and oil and gas pipelines. Niobium also plays a crucial role in superconducting magnets used in particle accelerators and MRI scanners.
• Rare Earth Elements (REEs) are a group of 17 similar lustrous, silvery-white heavy metals. They find use in electrical and electronic components, lasers, and magnetic materials.

3. Government's Regulatory Changes

• The government has made amendments to the Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957, which now allows for the specification of new royalty rates.
• This shift is particularly important as it lowers the royalty rates to align with global benchmarks, making commercial exploitation of these minerals feasible through auctions conducted by the central or state governments.

4. Revised Royalty Rates

• Lithium is a royalty of 3% based on the London Metal Exchange price.
• Niobium is a 3% royalty calculated on the average sale price, applicable to both primary and secondary sources.
• REEs is a royalty of 1% based on the average sale price of Rare Earth Oxide, the primary ore containing REEs.

The Ministry of Mines has outlined the method for calculating the average sale price of these minerals, which will be used to determine auction parameters.

5. Economic and Environmental Impact

• The primary objective behind these changes is to stimulate domestic mining and reduce the dependence on imports of these critical minerals.
• This, in turn, will support the growth of industries like electric vehicles (EVs) and energy storage solutions.
• As India strives to meet its commitment to transition to cleaner energy sources and achieve net-zero emissions by 2070, these minerals are of paramount importance.

6. Lithium in Focus

• India currently imports all of its required lithium, but efforts are underway to explore domestic sources, including the lithium-rich brine pools in Rajasthan and Gujarat, as well as mica deposits in Odisha and Chhattisgarh.
• It's essential to note that India is relatively late in entering the lithium value chain at a time when the EV sector is poised for transformation, with potential advancements in lithium-ion battery technology.
• The nation has imported a substantial number of lithium batteries from overseas, particularly from China.

7. Challenges in Rare Earth Elements

• REEs, despite their small quantities, pose a significant challenge in the EV supply chain.
• Much of the global production and processing of rare earth elements are concentrated in China, making it difficult to secure a consistent supply.
• In the context of electric vehicles, rare earth elements are utilized in motors rather than batteries.
• Permanent magnet motors rely on magnets made from REEs such as neodymium, terbium, and dysprosium.
• However, mining and processing these elements often entail environmentally damaging practices, including open-pit mining and the potential contamination of water sources with acids, heavy metals, and radioactive materials when not properly regulated.