Why in the News?
The Union Cabinet approved the rationalisation of royalty rates for graphite, caesium, rubidium, and zirconium to strengthen India’s domestic mineral base and reduce import dependency.
About the New Royalty Rates:
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What is Royalty?
- Definition: It is a payment made by a mining company to the government, the sovereign owner of natural resources, for the right to extract and sell minerals.
- Legal Basis in India: The Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) is the principal statute regulating mineral development, licensing, and royalty payments in India.
- Types of Royalty Systems:
- Unit-based (per tonne): Fixed payment per quantity extracted.
- Ad valorem: A fixed percentage of the sale value of the mineral (now used for most critical minerals).
- Profit-based: A share of net revenue or profits after deductions.
- Purpose: Ensures the state earns equitable returns from resource extraction while maintaining regulatory control and public ownership of mineral wealth.
Royalty Governance: Legal and Administrative Framework
- Authority:
- The Central Government, through the Ministry of Mines, determines and revises royalty rates.
- The Union Cabinet approves new rates; these are later notified by the Ministry.
- Legal Basis: The Second Schedule of the MMDR Act lists royalty rates for each mineral.
- Collection:
- Royalty is paid by leaseholders or miners to the state government under central law.
- Rates are periodically revised to align with market fluctuations and strategic priorities.
- Calculation Example: Royalty = IBM-published Sale Price × Royalty Rate (%) × Quantity Produced.
Default Royalty Rates in India:
- For minerals not listed separately in the Second Schedule, a default royalty rate of 12% of the average sale price (ASP) applies under the MMDR Act.
- However, for critical and strategic minerals, the government has rationalised rates downward (1–4%) to:
- Attract private investment in exploration.
- Ensure competitive auctions.
- Promote domestic production of minerals vital to EVs, semiconductors, and renewable energy.
- The shift from uniform high rates to graded, mineral-specific rates reflects a move toward a market-responsive and technology-driven resource policy.
| [UPSC 2025] Consider the following statements: I. India has joined the Minerals Security Partnership as a member. II. India is a resource-rich country in all the 30 critical minerals that it has identified. III. The Parliament in 2023 has amended the Mines and Minerals (Development and Regulation) Act, 1957 empowering the Central Government to exclusively auction mining lease and composite license for certain critical minerals. Which of the statements given above are correct? (a) I and II only (b) II and III only (c) I and III only * (d) I, II and III |
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