The Ministry of Mines proposes Overhauls in Mining Royalties: Incentivizing Low-Grade Iron Ore Processing and Critical Mineral Development

Introduction

The Government of India, through the Ministry of Mines, has suggested major amendments to the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) and the Minerals (Other than Atomic and Hydro Carbon Energy Minerals) Concession Rules, 2016 (MCR, 2016). ^[1]These amendments seek to rationalize royalty on major minerals and promote the beneficiation of low-grade Hematite Iron Ore. The reforms correct inequalities in royalty rates, encourage sustainable use of resources, and harmonize India’s mining policies with changing economic and technological requirements. This article examines the major proposals and their implications for the mining industry.

Explanation (Key Points)

1. Rationalization of Royalty Rates for Major Minerals

Limestone, Limekankar, Limeshell, Marl, and Dolomite:

• Such minerals, now classified as minor minerals, will become major minerals. Rates of royalty in non-auctioned mines will rise by 50% (e.g., Limestone from ₹90 to ₹135/tonne). Rates in auctioned mines stay unchanged to keep competitive bidding high.
• Rationale: Deals with revenue loss to states when minor minerals become major minerals and provides inflation-linked revenue growth through ad valorem adjustments.

Graphite:

• Trend away from a flat per-tonne royalty towards ad valorem rates (4% for high-grade Graphite with ≥80% fixed carbon; 12% for lower grades).
• Reason: Reflects huge price differences between low- and high-grade Graphite, which is essential for clean energy technologies and electric vehicle batteries.

Rubidium:

• A newly introduced critical mineral, suggested at 2% royalty (ad valorem) since it is primarily mined as a by-product.
• Rationale: Stimulates investigation of this unusual metal, crucial for high-tech technologies in defence, aerospace, and telecommunications.

2. Promoting Beneficiation of Low-Grade Hematite Iron Ore

Reduced Royalty Rates:

• Royalty for beneficiated low-grade ore (Fe content <58% upgraded to ≥62%) reduced from 15% to 10% (ad valorem).
• Rationale: Incentivizes processing of India’s abundant low-grade reserves (66.5% of total reserves) to reduce dependency on high-grade imports.

Operational Flexibility:

• Allows transfer of low-grade ore (including Banded Hematite Quartzite/Jasper) to third-party plants for beneficiation.
• Royalty and levies charged on input ore quantity/grade, not output, to simplify compliance.

Pricing Mechanism:

• Low-grade ore’s Average Sale Price (ASP) set at 75% of the lowest Hematite grade to reduce royalty burdens and attract investment.

3. Procedural Revisions in MCR, 2016

Transparency Measures:

• Sellers must issue certificates confirming royalty payments; purchasers declare beneficiation outcomes to prevent tax evasion.

Penalties for Non-Compliance:

• Sellers lose royalty benefits if buyers fail to process ore as declared, ensuring accountability.

Conclusion

The suggested changes reflect a strategic direction towards environmentally sustainable mining and efficiency in use of resources. Through the rationalization of royalty systems, India hopes to maximize state revenues, decrease import dependence on key minerals such as Graphite, and tap the value of low-grade iron ore deposits. The emphasis on beneficiation corresponds with international patterns of mineral processing and clean energy transition. These reforms, if effectively implemented, could support India’s mining industry, draw investments, and enhance its position in the international supply chain for strategic minerals. Public consultation reflects the government’s emphasis on inclusive policymaking, reconciling economic growth with environmental and social concerns.
 

^[1] https://mines.gov.in/admin/download/67ad939186a301739428753.pdf