[Answered] Examine the potential of revised royalty rates to resolve India’s critical mineral bottlenecks. Analyze the significance of this policy for graphite, caesium, rubidium, and zirconium in the current geopolitical backdrop.

Introduction

Amid surging global demand for green-energy minerals, India remains heavily import-dependent for key critical minerals. Revised royalty rates for graphite, caesium, rubidium and zirconium reflect a strategic push to strengthen domestic exploration, production, and supply-chain resilience.

What is the Recent Move?

1. India’s decision to rationalise royalty rates for selected critical minerals marks a major shift in aligning mineral policy with energy transition priorities and geopolitical realities.
2. By moving graphite to an ad valorem regime and lowering royalty rates for caesium, rubidium, and zirconium, the government seeks to correct price distortions, attract private bidders, and reduce India’s strategic vulnerabilities in critical mineral supply chains.

Potential of revised rates to address critical mineral bottlenecks

1. Improving commercial viability through ad valorem pricing: The shift from per-tonne to ad valorem royalty for graphite aligns royalties with market prices. Low-grade deposits earlier became unviable during price downturns, discouraging private mining. Now, royalties will rise and fall with ASP (Average Sale Price), giving miners predictable margins. This aligns with global best practices in Australia and Canada.
2. Boosting auction participation: Under the MMDR Act, minerals without defined royalty rates attract a default 12% rate. Caesium, rubidium, and zirconium earlier fell under this rule despite having no stable ASP or domestic production. A high, arbitrary royalty deterred bidders; hence only 34 out of 81 blocks have found takers since 2023. Reduced royalty rates (1–2%) lower entry barriers and can stimulate exploration in deep-seated deposits.
3. Encouraging domestic exploration and reducing import dependence: India is 100% import-dependent for several critical minerals essential for EVs, batteries, semiconductors, and clean-energy technologies. Revised royalty rates support the National Mineral Exploration Policy (NMEP) and Critical Minerals List (2023), improving prospects for locating associated minerals such as lithium, niobium and REEs.
4. Enhancing state revenues while promoting investment: Ad valorem royalties ensure that states benefit during price booms without penalising miners during downturns. This creates a balanced fiscal-investment framework, similar to Chile’s copper royalty regime.

Significance in the current geopolitical backdrop

1. China’s dominance and export restrictions: China controls 90% of global critical mineral processing and has imposed export curbs on several rare earths and strategic minerals. The desire to reduce strategic dependence on China—and the vulnerability exposed by its year-long restrictions—makes the royalty revision geopolitically significant.
2. Strategic alignment with global mineral alliances: India’s move aligns with mechanisms like the Minerals Security Partnership (MSP) and Indo-Pacific supply-chain initiatives that promote diversified sourcing away from China. Lower royalties make India an attractive site for global investment and technology partnerships.
3. Supporting India’s green-economy objectives: Demand for graphite is increasing due to battery manufacturing; zirconium is crucial for nuclear reactors and advanced optics; caesium and rubidium are critical for quantum technologies and atomic clocks. Rationalising royalties advances the goals of the National Electric Mobility Mission, National Green Hydrogen Mission, and semiconductor initiatives.

Remaining structural constraints

However, royalty reform alone cannot resolve bottlenecks.

1. Processing ecosystem gaps: India accounts for only 3% of global processed copper, indicating limited refining capacity across minerals.
2. Regulatory rigidity and lack of technical expertise: CSEP’s report highlights weak exploration incentives and underdeveloped deep-mining capabilities.
3. Limited private participation in REE processing: Historically restricted due to classification as atomic minerals.

Unless supported by processing infrastructure, technology partnerships, and skilled manpower, expanded mining may not translate into strategic self-reliance.

Conclusion

As highlighted in CSEP’s analysis and echoed in Dani Rodrik’s work on structural transformation, royalty reforms are necessary but insufficient; India must combine them with processing capacity, regulatory clarity, and global partnerships for true mineral security.