Govt Sets Royalty Rates for Graphite, Caesium, Zirconium

The Union Cabinet has approved a rationalisation of royalty rates for four critical minerals, graphite, caesium, rubidium, and zirconium to speed up auctions and boost domestic supply for green-energy and high-tech industries. The move also brings clarity by linking the royalty rates to the average sale price (ASP) of the metal contained in the ore. Which practical effects should miners, service providers, and investors keep an eye on?

What Exactly Changed?

The government specified or revised the following royalty rates (ad-valorem basis): caesium, 2% of ASP; rubidium, 2% of ASP; zirconium, 1% of ASP; graphite, 2% of ASP for ore with ≥80% fixed carbon and 4% of ASP for ore with <80% fixed carbon. Graphite’s rate moves from a per-tonne basis to an ad-valorem basis, so royalty receipts track price and grade. These details are in the official PIB (Press Information Bureau) release and the Cabinet note.

Why this matters: these minerals are used in electric-vehicle batteries, nuclear and aerospace components, optics and other strategic uses. India imports a big share of graphite and related inputs; the rationalisation aims to make bids at auctions more predictable and encourage domestic production, which could reduce import dependence over time. The cabinet also noted that several graphite blocks are already in the auction pipeline, helping bidders make financeable offers.

How Could Miners And The Supply Chain Respond?

Will the new rates speed up mining activity and private investment? The government argues yes. Fixing ad-valorem rates gives miners a clear rule to build cost models, which can improve bid quality and attract financiers to mining projects. The Cabinet release notes that recent NITs (Notice Inviting Tender) include graphite, rubidium, caesium, and zirconium blocks and the rate clarity should help bidders submit rational financial offers.

Practical points for the sector:

• Auction economics: Ad-valorem royalties mean royalty outgo will rise with prices and fall when prices drop. For graphite, higher-grade ore now attracts a lower royalty rate (2% for ≥80% fixed carbon) than lower grades (4%), which reflects the value difference across grades.

• Capex and timelines: Mining and processing these minerals require capital and time. Investors should watch planned auction schedules, the winning bids’ payment profiles, and any upfront work commitments companies must make. The PIB release points to multiple blocks already handed over to agencies for tendering.

• Supply chain signals: Increased domestic output could help reduce imports (India currently imports a substantial portion of its graphite needs). But scale-up depends on processing facilities and access to inputs such as APIs for downstream industries.

What Should Investors Watch Next?

Which indicators will tell you if the policy is working? Watch these three signals closely:

1. Auction outcomes and participation: High bidder participation and competitive bids, plus transparency on who wins and the price will show investor interest. The government has already issued NITs for a sixth tranche that include graphite and other minerals; those results are an early test.

2. Capex announcements and offtake deals: Look for mining companies or large industrial groups announcing investment plans, joint ventures or offtake agreements. These will indicate whether industry players see viable commercial projects at the new royalty levels. Business reporting and company disclosures will be the first place such plans appear.

3. Price and margin impact: Because royalties are now linked to ASP, rising global prices will increase royalty cash outflows and affect project margins. Investors modelling returns should run scenarios with both low and high price paths to see the sensitivity of cash flows to royalty changes. The PIB noted recent royalty rates for many critical minerals fall in the 1–4% range, which provides a benchmark for modelling.

As the auctions move forward and private players react, market observers will get a clearer picture of whether the policy nudges India towards steadier domestic supplies or simply alters the economics of extraction.

Conclusion

The Cabinet’s decision gives clearer, grade-sensitive royalties for four strategic minerals and aims to improve auction economics and investor confidence. But the real test will be in auction participation, follow-on capex, and whether processing and logistics keep pace with raw-material output. Will these steps reduce import dependence and build a resilient domestic supply chain, or will implementation challenges slow progress?

References

Business Standard