Industry
Centre weighs grand plan for critical mineral show
Summary
- The plan, drafted by the Union commerce and industry ministry in discussion with the Prime Minister’s Office, envisages creating country-specific dedicated investment funds to acquire majority equity stakes in foreign critical minerals companies to generate capacity for India.
New Delhi: India is putting in place an ambitious plan to secure access to critical minerals in foreign countries by buying majority stakes in overseas companies, two people aware of the development said. This comes at a time when its neighbour China has already captured a big chunk of the global critical mineral supply chain through stakes in overseas mines and its significant processing prowess.
The plan, drafted by the Union commerce and industry ministry in discussion with the Prime Minister’s Office (PMO), envisages creating country-specific dedicated investment funds to acquire majority equity stakes in foreign critical minerals companies to generate capacity for India, the people cited above said on condition of anonymity.
The move comes on the back of India’s growing need for critical minerals and rare earth elements (REEs), which are essential for high-tech industries such as green energy, green mobility and electronics. India imports most of its needs for these minerals from imports, despite having reserves of its own.
“The dedicated investment funds initiative is part of India’s efforts to secure critical minerals including forging strategic partnerships with resource-rich countries such as Australia, Chile, and Argentina to establish long-term supply agreements," said the first person cited above.
Also read | Budget 2024: Why Nirmala Sitharaman waived import duty on critical minerals
As part of the plan, the commerce ministry will leverage its trade connections across the world to send delegations to critical mineral rich countries in upcoming months to buy majority equity stakes in foreign companies through state-run Khanij Bidesh India Ltd (KABIL).
Established in August 2019, KABIL is a joint venture between National Aluminium Company Ltd. (NALCO), Hindustan Copper Limited (HCL) and Mineral Exploration & Consultancy Limited (MECL). It’s mandate is to source and develop critical minerals internationally.
The second person cited above said that the plan being discussed includes creating country-specific funds, and capacity building in mineral-rich countries, among others. “The Union government is holding high-level discussions on the matter," the second person said. “Several meetings have taken place, with some chaired by top officials from the Prime Minister’s Office."
Neither person disclosed the likely amount to be allocated to the funds.
Queries emailed to the PMO and the commerce and industry ministry remained unanswered till press time.
“These policies should include providing subsidies for the critical minerals processing sector, offering support for research and development, and establishing favourable trade agreements to secure raw materials from other countries," said Ajay Srivastava, founder of Global Trade Research Initiative (GTRI) and a former India Trade Service officer.
“For India to reduce its reliance on imports and enhance its global standing in critical minerals, a concerted effort toward building processing infrastructure is essential," added Rakesh Surana, partner at Deloitte India.
The push for critical minerals
India imports up to 95% of its lithium, cobalt, and graphite needs from Australia, Chile, and China. While cobalt is sourced primarily from the Democratic Republic of Congo (DRC), 90% of rare earth elements are sourced from Myanmar and Vietnam.
Despite having significant reserves of rare earth elements and other essential minerals, India’s lack of commercial processing facilities forces it to rely heavily on imports. A case in point being India holding the world’s fifth-largest deposits of rare earths.
Also read | Mint Primer | Mining minerals: Could cement & steel get dearer?
Srivastava said that China already has significant stakes in mining operations across the globe, including in Congo, Chile, and Australia, thereby securing its future supplies. Additionally, China is a major player in the processing and refining of these minerals, which is a critical step in their supply chain. “China refines 60% of the world's lithium and 80% of the world's cobalt, essential for lithium-ion batteries," Srivastava added.
KPMG’s Surana added, “While China does not possess all the necessary raw material reserves, its well-established processing capabilities allow it to exert significant control over global supply chains," Surana added.
What India has done
India, too, has taken several significant steps to reduce its dependence on imports of critical minerals. This month, India and the US inked a memorandum of understanding (MoU) for establishing a secure supply chain for essential minerals such as lithium, cobalt, and rare earth elements.
“The critical minerals partnership agreement could advance towards foreign trade agreement (FTA) status," union commerce and industry minister Piyush Goyal said following his recent visit to the US.
Also read | Budget 2024: Critical minerals push key to cross-industry value addition
Then, state run ONGC Videha Ltd (OVL), Oil India Ltd and KABIL signed an agreement last month with UAE’s International Resources Holding to identify, acquire, and develop critical mineral projects worldwide.
India also joined the Mineral Security Partnership (MSP) in June 2023, an international alliance including the US, the UK, Canada, Australia, South Korea, and Japan, which aims to secure a stable global supply of essential minerals, reducing reliance on dominant producers such as China.
In January 2023, India also struck a deal with a state-run company of Argentina to explore and develop five lithium-rich sites in Latin American country.
Why critical minerals are critical
Critical minerals are vital to the modern economy, and are critical for a range of industries, from consumer electronics to renewable energy solutions. Lithium, cobalt, chromium, and graphite, among others, enable the production of high-tech devices like smartphones, EV batteries, and even medical devices.
These minerals are indispensable across various industries due to their unique properties. Lithium and cobalt are essential for lithium-ion batteries, which power electronics and electric vehicles, supporting advancements in sustainable energy.
Graphite is widely used in battery production and also serves as an effective lubricant in industrial applications. Gallium and germanium play critical roles in electronics and solar panel manufacturing, contributing to high-efficiency semiconductors and photovoltaic cells. Rare earth elements (REEs) are crucial for producing strong magnets, indispensable in wind turbines, electric vehicles, and various defense technologies, highlighting their importance in clean energy and national security applications.
India has identified 30 critical minerals essential for self-reliance, technological progress, and economic growth, crucial to sectors like space, electronics, communications, energy, and electric batteries.
Also read | PLI scheme eyed for critical minerals
These minerals include Antimony, Beryllium, Bismuth, Cadmium, Cobalt, Copper, Gallium, Germanium, Graphite, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, Platinum Group Elements (PGE), Phosphorus, Potash, Rare Earth Elements (REE), Rhenium, Selenium, Silicon, Strontium, Tantalum, Tellurium, Tin, Titanium, Tungsten, Vanadium, Zirconium.
According to commerce ministry data, India’s import of lithium increased from $8.7 million in FY22 to $22.3 million in FY23 and $24.6 million in FY24. Also, graphite import increased from $34.3 million in FY22 to $34.9 million in FY23 and $37.3 million in FY24. In addition, imports of bauxite and alumina essential for aluminium production have also jumped from $254.7 million in FY22 to $294.6 million in FY23 and $340.6 million in FY24.
