Lithium: India considers a mining royalty of 3% of the LME price

The Indian federal government plans to set the royalty rate that mining companies must pay for lithium extraction at 3% of the prevailing London Metal Exchange (LME) price.

India, which is exploring ways to secure supplies of lithium – a key raw material used to make batteries for electric vehicles – found its first lithium deposits in the federally administered region of Jammu and Kashmir in February.

The government is expected to auction the newly discovered lithium blocks, with estimated reserves of 5.9 million tonnes, later this year.

At least a dozen Indian and foreign companies such as Adani Enterprises, Vedanta Ltd, Reliance Industries, Jindal Steel and Power Ltd, Himadri Chemicals and Korea’s LX International are likely to participate in the auction. The Indian Cabinet is expected to consider a proposal to set the royalty rate for lithium mining at 3% of the prevailing rates at the LME.

The royalty rate – to be paid to the local government of Jammu and Kashmir – would be an important step towards the country’s first auction for lithium blocks. India’s Federal Ministry of Mines sets the royalty rates, but the revenues go to state governments or federally administered territories.

India has already used the LME benchmark to set the royalty rate for bauxite mining.

“We have studied the royalty rates of other lithium producing countries,” the sources said. “Even in Australia the royalty rate is 3 per cent of the LME, while in Argentina, Bolivia and Chile – the so-called lithium triangle – it is 4.5 per cent of the LME.”

India’s intention to auction its lithium reserve – estimated to be the seventh largest deposit – comes amid a push by major economies to secure lithium supplies.

The United States, Canada and other countries have established a new partnership to secure supplies of critical minerals, including lithium.

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