Introduction
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- India has introduced a Critical Mineral Mission in the Budget 2024-25 to enhance domestic production and recycling of crucial minerals such as copper and lithium.ย
- These minerals are vital for sectors including defense, agriculture, energy, pharmaceuticals, and telecommunications.ย
- Despite their strategic importance, they face supply chain vulnerabilities due to limited availability and concentration in specific geographic regions. To address these challenges, India is prioritizing the securing of critical mineral supplies.
What are Critical Minerals?ย
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- Critical minerals are those minerals which are essential for economic development and national security.
- ย The lack of availability of these minerals or even concentration of existence, extraction or processing of these minerals in few geographical locations may lead to supply chain vulnerability and disruption.
Factors Affecting Criticality
Critical Minerals Identified in India
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- Thirty Minerals Listed as Critical Minerals for India.
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Importance of Critical Minerals for India
Economic Development:
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- Critical minerals are pivotal for high-tech industries like electronics, telecommunications, transport, and defense, fostering job creation, income generation, and innovation.ย
- For example, India’s ambition to become a semiconductor manufacturing hub depends on these minerals. Two essential minerals to manufacture semiconductors and advanced electronics in India are gallium and germanium but India produces a little gallium as a byproduct while producing alumina depends entirely on import for germanium.ย
Energy Transition:
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- Essential for technologies such as solar panels, wind turbines, and advanced batteries, these minerals are key to achieving net-zero emissions by 2070.ย
- For example, in FY 23, there has been a 58% rise in the import of Lithium as it is used in electric vehicles (EVs), energy storage, and consumer electronics industries.ย
- India imports almost 70โ80 per cent of its lithium and 70 percent of its lithium-ion from China.
Competitive Value Chain:
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- Identifying and utilizing critical minerals can attract foreign direct investments and establish a robust value chain in India, aligning with global strategies like China+1.ย
- India has become the newest partner in the US led Mineral Security Partnership (MSP) to bolster critical mineral supply chains.ย
- The partnership aims to accelerate the development of diverse and sustainable critical mineral supply chains.ย
- As global demand for lithium-ion batteries continues to rise, India has a unique opportunity to support resilient supply chains of critical minerals.
National Security:
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- These minerals are vital for developing high-quality materials for defense, aerospace, nuclear, and space sectors, thereby bolstering national security.ย
- For example: The development of the Light Combat Aircraft (LCA) Tejas, which uses critical minerals like titanium and cobalt, highlights the importance of these resources for defense applications.
Reducing Import Bill:
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- Increasing domestic production of critical minerals can reduce dependency on imports, thus lowering the import burden and current account deficit.ย
- Between the financial years 2022 (FY22) and FY23, there has been a jump of 34% in imports of critical minerals including Glauconite, Nickel, Platinum Group Elements (PGE), Potash, Graphite, Molybdenum (Ore), Phosphorite (Phosphate), Lithium, Titanium, and Rare Earth Elements (REE).
- The discovery of lithium reserves in Karnataka and Rajasthan can potentially reduce Indiaโs reliance on lithium imports for battery production in electric vehicles (EVs).
Employment Generation:
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- The mining sector is labor-intensive, with high potential for job creation. In FY19, the sector employed around 480,000 individuals daily, with 78 per cent of these jobs in the public sector. Currently, it is estimated that 580,000 to 600,000 people are employed daily in mining activities. A 10 % increase in mineral production, in value terms, could generate an additional 50,000 to 70,000 daily jobs, significantly boosting employment in the sector.
Global Competitiveness:
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- Strengthening the supply chain of critical minerals can enhance Indiaโs global competitiveness in manufacturing and technology sectors.ย
- For instance, under Indiaโs leadership, for the first time, the G20 discussed and agreed to strengthen the global critical mineral value chain.
- India also partnered with Australia, through the India-Australia Comprehensive Economic Cooperation Agreement (CECA) in 2022, to collaborate on upstream critical mineral technologies. More recently, Khanij Bidesh India Ltd (KABIL) has signed a US$24 million lithium exploration and mining pact for 5 lithium blocks with Argentina.
Innovation and R&D:
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- Investment in research and development (R&D) for efficient extraction and processing of critical minerals can drive innovation.ย
- For instance, The Australia-India Critical Minerals Research Hub will foster collaborative research activities between researchers and industry leaders from both India and Australia, focusing on critical aspects of mineral exploration, extraction, processing and recycling.
Challenges with Critical Minerals in India
Geopolitical Monopoly:
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- Few countries dominate the supply of critical minerals, leading to oligopolistic markets.
- ย For instance, Australia controls 55% of lithium reserves, and China has 60% of rare earths.
- India’s reliance on China for rare earth elements (REEs), which are crucial for electronics and renewable energy technologies, illustrates the vulnerability due to geopolitical monopoly.
Chinaโs Dominance:
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- China is a major player in the global supply chains of critical minerals, especially in processing and refining, accounting for about 60% of worldwide production and 85% of processing capacity.ย
- India’s dependence on Chinese imports for lithium-ion batteries and other electronic components highlights the impact of China’s dominance on Indian industries.
Geopolitical Risks:
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- Concentration in specific regions makes the supply vulnerable to geopolitical tensions and conflicts.ย
- For example, the civil war in the Democratic Republic of the Congo impacts the global supply of cobalt.ย
- The ongoing conflict in Myanmar, a key supplier of rare earth minerals, has disrupted supply chains and affected Indian industries relying on these imports.
Resource Nationalism:
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- The geographical concentration has led to resource conflicts and increased nationalism, affecting trade.ย
- For instance, resource nationalism is rising in Africa. The geographical concentration of critical minerals in Africa, such as cobalt in the Democratic Republic of the Congo, platinum in South Africa, and bauxite in Guinea, has led to increased control and regulatory measures by local governments.
- ย India’s restrictions on the export of certain minerals, such as bauxite and iron ore, aim to ensure domestic availability but can also lead to international trade tensions.
Price Volatility:
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- Limited trading opportunities on exchanges and insufficient data on consumption and production lead to price volatility and investment delays.ย
- For instance, the fluctuating prices of imported minerals like lithium and cobalt have impacted the cost structures of Indian manufacturers, particularly in the battery and electronics sectors.
Environmental Concerns:
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- Mining activities can cause biodiversity loss, water depletion, and pollution.ย
- For example, Lithium mining in Chile’s Atacama Desert is water-intensive, consuming large amounts of water in a region already facing water scarcity, which can lead to conflicts over water resources and impact local ecosystems.
- ย In India, mining activities in states like Odisha and Jharkhand have led to deforestation, water pollution, and displacement of local communities, highlighting the environmental costs associated with mineral extraction.
Long Gestation Period for Alternatives:
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- Developing alternative sources and processing capabilities can take over 15 years, delaying self-reliance.ย
- India’s initiatives to develop domestic lithium processing and refining capacities, including collaborations with countries like Australia, are long-term projects that may take over a decade to become fully operational.
Government Initiatives for Critical Minerals in India
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- MMDR Amendment Act, 2023: Allows the Central Government to auction blocks of 30 critical minerals, including lithium, cobalt, and rare earth elements (REEs), and permits private sector entry through auctions.
- FDI Liberalisation: 100% foreign direct investment allowed in the mining of certain reclassified minerals such as lithium, cobalt, and nickel.
- International Collaboration: India joined the Mineral Security Partnership, a US-led initiative, and is collaborating with countries like Argentina and Australia for lithium and cobalt exploration. Additionally, India is part of the Indo-Pacific Economic Framework (IPEF) to secure supply chains for critical minerals like REEs and graphite.
- Institutional Initiatives: The Geological Survey of India has initiated over 250 projects to explore critical minerals such as beryllium, tungsten, and zirconium, and India has launched startup challenges for developing advanced processing technologies.
- Budgetary Support 2024: Customs duties on 25 critical minerals, including lithium, nickel, copper, and cobalt, have been removed, and the concessional customs duty on lithium-ion cells extended until March 2026.
- Critical Mineral Mission: Announced in the 2024 budget to boost the critical minerals sector by promoting domestic production, recycling, and exploration of minerals like lithium, REEs, and cobalt.
- The Critical Mineral Mission is an initiative launched by the Centre to ensure that the country has a sufficient supply of critical minerals, including copper, lithium, nickel, cobalt and rare earth elements.ย
- These minerals are essential components in almost all electronic gadgets โ ranging from laptops to electric cars.
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- Mines and Minerals (Development and Regulation). Amendment Act, 2023:ย The Central Govtย has also passed this Actย through which it can award exploration licences for 30 deep-seated and critical minerals — including antimony, beryllium, bismuth, cadmium, gallium, germanium, graphite, hafnium, indium, lithium, molybdenum, niobium, and others.
- National Mineral Policy 2019: This policy emphasizes the exploration and development of critical minerals, such as rare earth elements and graphite, to reduce import dependency and enhance domestic supply.
- Production-Linked Incentive (PLI) Scheme: Aimed at boosting domestic manufacturing of high-tech products, which includes incentives for sectors reliant on critical minerals, such as lithium, cobalt, and nickel for electronics and electric vehicles.
- Khanij Bidesh India Limited (KABIL): A joint venture between three public sector enterprises to ensure a consistent supply of critical minerals like lithium and cobalt by exploring and acquiring mineral assets abroad.
- Strategic Mineral Reserves: Establishment of strategic mineral reserves for minerals such as lithium, cobalt, and REEs to ensure long-term availability.
- Exploration of Deep-Seated Minerals: The government has initiated projects to explore deep-seated minerals that are crucial for advanced technologies, including rare earth elements and tungsten.
- Collaboration with Japan and South Korea: India has signed agreements with Japan and South Korea for the exploration and development of critical minerals such as rare earth elements and lithium, ensuring a diversified and secure supply chain.
- Partnership with Canada: India is exploring partnerships with Canada for the supply of critical minerals, including cobalt and nickel, leveraging Canada’s rich mineral resources.
- African Outreach: India is enhancing its engagement with African nations rich in critical minerals such as cobalt, platinum, and manganese, aiming for mutual benefits in terms of investment and resource development.
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Way Forward
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- Implement Expert Recommendations: Establish the Centre of Excellence for Critical Minerals (CECM) in the Ministry of Mines, collaborating with international agencies for strategic mineral acquisition.
- Expand Mineral Security Partnership (MSP): Include more countries, especially critical mineral-rich African nations, to report on the status and future of critical mineral markets.
- Encourage FDI in Domestic Mining: Boost FDI to support businesses and bring international mining expertise to aid in exploring critical minerals.
- Invest in Beneficiation and Processing: Develop facilities in Africa to promote local economies and sustainable relationships.
- Path to Global Leadership: Emulate Indonesia’s success in nickel to become a global leader in critical minerals.
- Align Mineral Incentives: Ensure that the production-linked incentive scheme for minerals aligns with global aspirations and creates employment opportunities.