Govt revises royalty rules for low-grade iron ore to boost steel

The Ministry of Mines notified new rules with a revised royalty framework for low-grade iron ore. This move makes the beneficiation of ores below 45% Fe content economically viable, aiming to unlock vast reserves and ensure raw material security.

In a move to unlock vast reserves of low-grade iron ore and ensure long-term raw material security for the steel industry, the Ministry of Mines on Tuesday notified new rules to make low-grade iron ore economically viable by introducing a revised pricing framework for royalty calculation. The new rules calculate the Average Sale Price (ASP) for Haematitic Iron Ore below the threshold value, making beneficiation economically viable.

The Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession (Third Amendment) Rules, 2026, notified on April 10, 2026, aim to bring Banded Haematite Quartzite (BHQ) and Banded Haematite Jasper (BHJ) into the usable category, addressing concerns over depleting high-grade resources, the Ministry of Mines said in a press release.

Addressing Commercial Unviability

Previously, iron ore with less than 45% iron (Fe) content lacked a defined Average Sale Price (ASP), which led to royalties being charged based on higher-grade prices, making the beneficiation of low-grade materials such as Banded Haematite Quartzite (BHQ) and Banded Haematite Jasper (BHJ) commercially unviable.

The threshold value of a mineral is the limit below which the material obtained after mining can be discarded as waste. The notified threshold value for Haematitic Iron Ore is 45% Iron (Fe) (Min.). There are huge quantities of iron ore below the threshold value in the country and some of which is in the form of BHQ or BHJ, which are the principal "host rocks" that contain iron ore.

Iron ore below 45% Fe content was previously considered as waste because the cost of separating the iron from the silica was too high. With modern technology, these can now be "beneficiated" - cleaned and concentrated- to create high-grade iron ore and is now an economically usable category "With the improvement in technology for processing and beneficiation, the iron ore resources of below threshold value, including the BHQ and BHJ, have become amenable to beneficiation to generate high-grade iron ore which can be used as feed grade ore for steel making," the Mines Ministry said.

In order to facilitate the beneficiation of such low-grade iron ore, a suitable policy was required to be provided.

Before the present amendment in the rules, there was no methodology to publish ASP of Haematite Iron Ore having iron content below threshold value (i.e., below 45% Fe) including for BHQ and BHJ. Thus, the ASP published for lowest grade of Haematitic Iron above the threshold value, i.e., 45% to below 51% Fe grade, was taken as the ASP for these grades. Use of ASP of higher grade for levying royalty, auction premium, etc. on the grade below threshold value made the beneficiation of such minerals uneconomical.

Revised Pricing Framework

The present amendment in the rules addresses this issue. Thus, the amended rule provides that the ASP of Haematite Iron Ore having Fe content below the threshold value will be calculated in various parameters.

"For 35% to below 45% Fe grade, the average sale price shall be equal to seventy-five per cent. of average sale price of 45% to below 51% Fe grade of Iron Ore. For below 35% Fe grade, the average sale price shall be equal to fifty per cent. of average sale price of 45% to below 51% Fe grade of Iron Ore," the Mines Ministry said.

Clarification on Run-of-Mine (ROM) Ore Royalty

The amendment also clarifies that royalty must be paid on screened Run-of-Mine (ROM) ore, preventing undervaluation during processing.

It said that in case the processing of run-of-mine results in decrease in its economic value, then royalty shall be chargeable on the lumps and fines after initial screening of unprocessed Run-of-Mine.

The term Run-of-Mine refers to raw unprocessed or uncrushed material in its natural state obtained after blasting or digging, from the mineralised zone of a lease area.

Raw unprocessed minerals are required to be processed to increase the concentration of the target mineral, remove impurities, and transform the material into a form that industries can actually use. The present amendment in the rules clarifies that economic value of mineral cannot be lowered in the name of processing of run-of-mine.

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