Centre proposes to lower benchmark price for bauxite

The centre has proposed lowering the benchmark price of bauxite (source of aluminium and gallium) used for calculating value of estimated resources and premium payable in auctions. According to a Mines Ministry proposal, the current Average Sale Price (ASP) of Bauxite contains a conversion factor of 6.4%. The Mineral Concession Rules, 2016 provide a formula for calculating the ASP for metallurgical grade bauxite on the basis of London Metal Exchange (LME) price of Aluminium.

This existing conversion factor was opposed by mining companies which claimed the price arrived by using this metric was too high and approached multiple courts of law, the Ministry said.

It has now been proposed to lower the conversion factor for metallurgical grade bauxite to 4.90% after a committee constituted for ASP rationalising submitted its report.


According to the proposal, the revised conversion factor will be made applicable for cases where mining leases are granted after the new metric is notified. “For all other mines of metallurgical grade bauxite, the conversion factor would remain as 6.4%,” the ministry said.

Royalty rate on minerals, applicable as a share of the sale price per tonne, is an important financial consideration for the bidders in auction of blocks. To protect that interest of state governments, the beneficiaries of royalty payments, companies need to pay a minimum fee linked to the ASP.

Lower bauxite rates will beneficial for aluminum makers and impacted industries. The metal is used in the Aerospace Industry as well as other industries requiring light metal. On the industrial side, aluminum is used in electrical power transmission, machinery and equipment and construction.

According to official estimates, the per capita consumption of aluminum in India is among the lowest in the world with only 2.2 kg as compared to world average roughly of 8 kg with 22-25 kg in developed nations.