The Indian government has taken a significant step toward strengthening the country's critical minerals ecosystem by approving revised royalty rates for four essential minerals. The Union Cabinet cleared the new rates for graphite, caesium, rubidium, and zirconium on Wednesday, November 16, 2025, marking a crucial policy shift aimed at encouraging domestic exploration and production.
New Royalty Structure Details
The royalty system for graphite has undergone a fundamental transformation, moving from fixed per-tonne rates to an ad valorem structure where royalties are calculated as a percentage of the mineral's sale value rather than a flat fee. Under the new framework, high-grade graphite containing 80% or more fixed carbon will attract a 2% royalty on the Average Sale Price (ASP), while lower-grade graphite will see a 4% royalty rate.
For the other minerals, caesium and rubidium will each draw a 2% royalty, and zirconium will be charged at 1%. This represents a substantial reduction from the earlier uniform 12% rate that applied by default to minerals without specified royalty rates.
The Average Sale Price refers to the weighted average of ex-mine prices from non-captive mines that sell their output in the open market. The Indian Bureau of Mines publishes ASP data monthly, and for critical minerals without established domestic pricing, the IBM relies on United States Geological Survey data converted into Indian rupees using prescribed conversion factors.
Market-Driven Approach to Mining
Industry experts have welcomed the royalty rate rationalization as a market-driven approach that will stimulate investment in the critical minerals mining sector. Rajib Maitra, Partner at Deloitte India, explained that moving to an ad valorem basis ties royalty payments to actual sale prices, making the system responsive to demand-supply dynamics.
"When global demand for critical minerals surges, prices rise and royalty revenues scale proportionally, ensuring states capture fair value," Maitra stated. He emphasized that the previous per-tonne model for graphite made mining commercially unviable during price downturns or for low-grade deposits.
The timing of these reforms is particularly significant, coming against the backdrop of China's export restrictions that have disrupted global supply chains for nearly a year. China controls approximately 90% of global critical mineral processing and had imposed curbs on several critical and heavy rare earth minerals amid trade tensions with the United States.
Addressing India's Critical Mineral Dependence
India faces substantial challenges in its critical minerals supply chain. The country is currently 100% import-dependent for several key minerals including cobalt, lithium, nickel, rare earth elements, and silicon - all crucial for batteries, solar technology, semiconductors, and advanced electronics.
The government maintains that the revised royalty rates will attract more bidders for upcoming auctions and help unlock associated minerals such as lithium, tungsten, rare earths, and niobium. However, progress has been slower than anticipated. Since critical mineral auctions began in 2023, only 34 blocks out of 81 put up for auctions have found successful bidders.
India defines "critical minerals" as those essential for economic development and national security, whose limited availability or concentrated production can expose the country to supply-chain risks. While India classifies 30 minerals as critical, caesium and rubidium are not included in this list, though they are considered critical by the United States, Canada, and South Korea.
Structural Challenges Remain
Despite the positive step of royalty reform, significant structural challenges continue to impede India's critical mineral development. A research paper from the Centre for Social and Economic Progress highlights that India's ability to mine critical minerals is hampered by a weak regulatory framework, insufficient incentives for private exploration and mining, and limited technical expertise and financial resources for developing deep-seated deposits.
An equally pressing challenge lies in processing capacity. India's mineral processing infrastructure for critical minerals remains nascent, forcing the country to depend heavily on imports of refined minerals and components.
Ajay Srivastava, founder of the Global Trade Research Initiative, pointed out that even if mining expands, India still lacks the processing capacity to convert raw minerals into high-purity materials usable in batteries, chips, optics, and advanced manufacturing.
"If India wants real self-reliance in EVs, electronics and strategic manufacturing, boosting mining is not enough — it must develop a full domestic processing ecosystem alongside it," Srivastava emphasized.
The latest royalty revisions follow earlier rounds of reforms, including February 2024 adjustments for 12 critical and strategic minerals, March 2022 revisions for glauconite, potash, molybdenum and platinum group minerals, and October 2023 notifications for lithium, niobium and rare earth elements.
Under the MMDR Act, royalty rates for most minerals are charged on an ad valorem basis linked to ASP, with only six major minerals previously payable on a per-tonne basis, including graphite. For any mineral without a specified rate, the default rate of 12% of ASP previously applied.
