NEW DELHI - India's federal government plans to fix the rate of royalty that mining companies must pay for extracting lithium at 3% of the prices prevailing at the London Metal Exchange (LME), two government sources said.

India, which has been exploring ways to secure supplies of lithium - a critical raw material used to make electric vehicle batteries - in February found its first lithium deposits in the federally administered region of Jammu and Kashmir.

The government is expected to auction the newly found lithium blocks, with estimated reserves of 5.9-million tonnes, later this year.

At least a dozen Indian and foreign companies such as Adani Enterprises ADEL.NS, Vedanta Ltd VDAN.NS, Reliance Industries, Jindal Steel and Power, Himadri Chemicals and Korea's LX International are likely to take part in the auction, said the sources, asking not to be named as the information is not public.

India's cabinet is expected to consider the proposal of fixing the rate of royalty for lithium mining at 3% of the rates prevailing at LME, they said.

The Ministry of Mines did not immediately respond to a request for comment.

The rate of royalty - to be paid to the local administration of Jammu and Kashmir - would be a major step towards the country's first auction of its lithium blocks, the sources said.

India's federal mines ministry fixes royalty rates, but the revenue goes to state governments or federally administrated territories.

India has previously used the LME benchmark to fix the royalty rate for bauxite mining, the sources said.

"We studied the royalty rates in other lithium mining countries," said one of the sources. "The royalty rates in Australia is also 3% of LME and (it) is 4.5% of LME in Argentina, Bolivia and Chile - called the lithium triangle."

India's plans to auction its lithium reserve - estimated as the seventh largest deposit - comes amid a push by major economies to secure lithium supplies.

The United States, Canada and other countries have established a new partnership aimed at securing the supply of critical minerals, including lithium.