Why the change
ASP refers to the weighted average of ex-mine prices of non-captive mines — those that sell their output in the open market rather than using it internally. The Indian Bureau of Mines (IBM) publishes ASP every month. For many critical minerals without domestic pricing, IBM uses United States Geological Survey (USGS) data, converting USGS-listed prices into Indian rupees using prescribed conversion factors.
Rajib Maitra, Partner at Deloitte India, told The Indian Express that royalty rate rationalisation is a market-driven approach which will encourage investment in the critical minerals mining sector.
“Moving to an ad valorem basis ties royalty 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 said.
The move comes against the backdrop of China’s export restrictions, which for nearly a year disrupted global supply chains. China controls 90% of global critical mineral processing and has imposed curbs on several critical and heavy rare earth minerals amid trade tensions with the US. While Beijing has eased some controls after discussions between US President Donald Trump and Chinese President Xi Jinping, the prolonged restrictions have already pushed countries — including India — to diversify supplies.
Demand set to go up in India
For India, the stakes are high. Its push for large-scale renewable energy expansion and EV adoption will sharply increase demand for these minerals, which the country still meets largely through imports.
India is currently 100% import-dependent for some key critical minerals such as cobalt, lithium, nickel, rare earth elements (REEs) and silicon, considered crucial for batteries, solar, semiconductors and advanced electronics.
The government has maintained that revised royalty rates will attract more bidders for upcoming auctions and help unlock associated minerals such as lithium, tungsten, rare earths and niobium.
But progress has been slow. Since critical mineral auctions began in 2023, only 34 blocks out of 81 blocks put out for auctions have found successful bidders. While India has vast resources of various critical minerals, its ability to mine and process them remains constrained by policy, capacity and investment challenges.
What revised rates mean
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. In the 30 minerals India classifies as critical, caesium and rubidium are not included, though they are considered critical by the US (both), Canada (caesium) and South Korea (caesium).
The latest move follows earlier rounds of royalty reforms. In February 2024, rates for 12 critical and strategic minerals — including cobalt, indium, rhenium, tellurium, titanium and tungsten — were revised, and in March 2022, revised rates were approved for glauconite, potash, molybdenum and platinum group minerals. Further revisions for lithium, niobium and rare earth elements were notified in October 2023.
Under the MMDR Act, royalty rates – listed in the Second Schedule – for most minerals are charged on an ad valorem basis linked to ASP. Only six major minerals, including graphite, were payable on a per-tonne basis. For any mineral without a specified rate, a default rate of 12% of the ASP applies.
For graphite, Maitra said the earlier per-tonne model made mining commercially unviable during price downturns or for low-grade deposits. With the shift to ad valorem rates, royalties now move in line with market value, he added.
He said caesium, rubidium and zirconium previously fell under the default 12% rule despite lacking established ASPs or commercial production, which discouraged bidders. The relatively low ad valorem royalty rates would give bidders a predictable and transparent framework, improving auction participation and supporting domestic production, he added.
Biggest bottleneck in critical minerals
However, royalty rate revision alone cannot ease structural challenges in India’s critical mineral ecosystem. A paper titled ‘Critical Mineral Supply Chains: Challenges for India’ by the Centre for Social and Economic Progress (CSEP) highlights that India’s ability to mine critical minerals is impeded by a weak regulatory framework, insufficient incentives for private exploration and mining, and limited technical expertise and financial resources for developing deep-seated deposits.
These systemic gaps explain the modest participation in auctions despite the government’s push.
An equally significant challenge lies in processing. India’s mineral processing capacity for critical minerals is still nascent and it depends heavily on imports of refined minerals and components.
The CSEP analysis points to three interlinked constraints: limited processing scale, difficulties in securing raw materials, and relatively low domestic demand. For instance, India has sizable copper smelting and refining capacity, yet accounts for only 3% of global processed copper output. Meanwhile, private participation in rare-earth processing has historically been restricted because REEs were classified as atomic minerals.
This gap between mining and processing could undermine India’s long-term goals, said Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI). “Even if mining expands, the country still lacks the processing capacity to convert raw minerals into high-purity materials usable in batteries, chips, optics and advanced manufacturing,” he said, adding, “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.”
While India has vast resources of various critical minerals, its ability to mine and process them remains constrained by policy, capacity and investment challenges. (Archive) 
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