MC EXPLAINER What the Cabinet’s critical minerals royalty decision means

Graphite with less than 80 percent fixed carbon content would be subject to 4 percent royalty of the average sale price, whilst that with 80 percent or more carbon content would attract 2 percent.

Caesium and rubidium would be subject to a royalty rate of 2 percent on the average sale price based on the specific metal contained in the ore produced. A royalty rate of 1 percent would apply to Zirconium.

Cabinet move clears a technical hurdle in auctions

The decision ensures that auctions under the sixth tranche of critical mineral blocks, launched by the Ministry of Mines on September 16, 2025, can now proceed. Under auction rules, royalty is a mandatory input for calculating the average sale price and bid parameters, and without it, bidders could not complete their technical and financial submissions. As a result, even though the auction process had begun, the government could not accept final bids for blocks containing these four minerals.

The sixth tranche includes 23 blocks—four for mining leases and 19 for composite licences—spread across several states and covering minerals such as rare earth elements (REE), tungsten, lithium, tin, graphite, vanadium, titanium, cobalt, zirconium, gallium, rock phosphate, and potash.

How does it help India’s critical minerals mission?

The new rates are designed to make mining projects more attractive to investors and enable the auction of mineral blocks that had been stalled in the absence of a clear pricing mechanism. By reducing cost uncertainty, the government aims to boost domestic exploration and production of these materials, which are vital for electric vehicles, electronics, and clean-energy technologies.

Graphite is a crucial component in electric vehicle (EV) batteries, primarily serving as the anode material, which enables high conductivity and charge capacity. However, India imports 60% of its requirement of Graphite. While the Cabinet has only now approved ad valorem royalty rates to enable new auctions of critical minerals, graphite mining itself is not entirely new in India. Currently, nine graphite mines are operational, and 27 graphite-bearing blocks—mostly non-critical mineral auctions conducted earlier by state governments under general mineral rules—have already been auctioned.

Zirconium is a versatile metal used in various industries, including nuclear energy, aerospace, healthcare and manufacturing, due to exceptional corrosion resistance and high temperature stability.

Caesium is mainly used in high-tech electronic sector, particularly in atomic clocks, GPS systems, other high precision instruments, medical instruments including in cancer therapy, etc.
Rubidium is used in making specialty glasses used in fibre optics, telecommunication systems, night vision devices etc.

India’s deeper challenge: lack of processing power

Even as the Cabinet’s decision unlocks new auctions, India faces a structural gap as it lacks the refining and purification capacity needed to turn them into high-purity materials for batteries, semiconductors, defence alloys and advanced electronics.

“Without this midstream capability, most of India’s mineral output continues to be exported in raw form — only to be imported back as high-value finished materials or components,” said Ajay Srivastava, founder of Global Trade Research Initiative (GTRI).

Graphite remains the only area with limited domestic capacity, thanks to companies like Graphite India and Epsilon Advanced Materials, but even here, high-grade inputs are largely imported, he said.

“For zirconium, rubidium and caesium, domestic refining infrastructure is almost non-existent. This dependence on foreign — particularly Chinese — processors exposes India’s supply chains to geopolitical and price risks, highlighting the urgent need to pair mining reforms with investment in mineral processing and technology ecosystems,” said Srivastava.