India's Budget 2024-25 announces the establishment of the Critical Mineral Mission to enhance domestic production and recycling of critical minerals, secure overseas mineral assets, and develop technology. The mission will also focus on cultivating a skilled workforce, implementing an extended producer responsibility framework, and establishing a robust financing mechanism.
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The Critical Mineral Mission is poised to play a crucial role in India's economic development by:
Reducing import dependency in strategically important minerals.
Enhancing the global competitiveness of India's mineral sector.
Supporting India's energy transition goals by securing supplies of critical minerals essential for renewable energy technologies.
This initiative not only aims at economic benefits but also strategically positions India in the global critical mineral market, enhancing its bargaining power and security of supply chains.
CRITICAL MINERALS:
Critical minerals are those minerals which are essential for economic development and national security, 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.
The Ministry of Mines constituted a seven-member Committee to identify the list of minerals critical to our country.
The critical minerals identification process tries to address five core objectives:
Based on a three-stage assessment process and considering important parameters such as reserve position, production, import dependency, use for future technology/clean energy and requirement of fertilizer minerals in an agrarian economy, the Committee has identified a set of 30 critical minerals.
These 30 minerals were declared "critical" by the central governmentin July 2023.
SIGNIFICANCE OF CRITICAL MINERALS:
Economic development:
The future global economy will be underpinned by technologies that depend on minerals such as lithium, graphite, cobalt, titanium, and rare earth elements. These minerals are essential for the advancement of many sectors, including high-tech electronics, telecommunications, transport, and defence.
For instance, critical minerals are crucial for India’s India Semiconductor Mission, aimed at building self-reliance in semiconductor production, which is fundamental to modern electronics and IT infrastructure.
National security:
The lack of availability of these minerals or concentration of extraction or processing in a few geographical locations outside India can lead to supply chain vulnerabilities.
Identifying and developing value chains for the minerals can reduce India’s dependence on import and promote mineral and energy security.
Geostrategic significance:
Covid pandemic exposed the limitations of global supply chain and countries are increasingly diversifying their supply chain through measures like the China+1 strategy. Having a credible source of critical mineral reserves can help India benefit from this diversification.
For instance, if the perceived size of the Lithiumreserves in J&K is borne out by further exploration, India could jump ahead of China in the global Li supply chain.
China+1 Strategy:
Coined back in 2013, it is a global business strategy in which companies avoid investing only in China and diversify their businesses to alternative destinations.
Although such model was in place by Japan and the US since 2008, it furthered much more during the pandemic.
Support transition to net-zero carbon energy systems:
Critical minerals are essential for the global shift towards a low carbon emissions economy and achieving 'Net Zero' targets through renewable energy technologies.
For instance, critical minerals are essential for India's aggressive push towards electric vehicle (EV) penetration—30% in private cars, 70% in commercial vehicles, and 80% in two and three-wheelers by 2030. This aligns with India's commitment to achieving Net Zero emissions by 2070.
Economic Diversification:
Critical minerals like lithium and cobalt can catalyze new industries such as battery manufacturing and energy storage systems in India. Diversifying into these high-tech sectors can reduce reliance on traditional industries, leading to a more robust and versatile economy.
CHALLENGES:
Limited Domestic Reserves and Exploration:
India, despite having a variety of mineral resources, often lacks substantial reserves in certain critical minerals.
For example, minerals like lithium and cobalt, which are crucial for battery technology, are not abundantly available in India.
Lack of Advanced Technology and Processing Facilities:
Another challenge in India's mining and processing of critical minerals stems from a lack of advanced technology and processing facilities.
A prime example is the difficulty in processing rare earth minerals from monazite sands in Kerala and Tamil Nadu, where India struggles due to inadequate technological capabilities.
Dependence on Imports:
Due to the lack of substantial domestic reserves for many critical minerals, India relies heavily on imports. This dependence on foreign sources for critical raw materials makes the country vulnerable to supply chain disruptions, geopolitical tensions, and fluctuating international market prices.
For instance, China, which dominates the global rare earth market, is a major source for these imports, exposing India to geopolitical risks and market fluctuations.
Environmental and Social Issues:
Mining activities for critical minerals often lead to environmental and social issues.
For instance, the extraction of ilmenite, a mineral important for producing titanium, in Tamil Nadu has led to environmental degradation along the coastline. This includes beach erosion and damage to the coastal ecosystem, affecting the livelihoods of local fishing communities.
Government initiatives:
MMDR Act: Through an amendment in the Mines and Minerals (Development and Regulation) Act (MMDR Act) in August 2023, 24 minerals were notified as critical and strategic minerals.
National Mineral Policy: Updated in 2019, this policy also focuses on the exploration and exploitation of critical minerals, ensuring that India's mineral potential is tapped effectively.
Khanij Bidesh India Ltd (KABIL): This is a joint venture between three state-owned companies — National Aluminium Company Ltd (NALCO), Hindustan Copper Ltd (HCL), and Mineral Exploration Corporation Ltd (MECL). KABIL's aim is to ensure a consistent supply of critical minerals and rare earth elements by acquiring and developing mineral assets overseas. It is exploring opportunities for lithium and cobalt in countries like Argentina, Australia, and Chile.
Research and Development: The government supports R&D initiatives for the exploration, mining, processing, and recycling of critical minerals. Indian Rare Earths Limited (IREL), a public sector unit, plays a significant role in the research and production of rare earth minerals.
Partnerships and Alliances: India is actively seeking international partnerships to secure supplies of critical minerals. For example, it has engaged with countries like Australia for the supply of lithium and cobalt.
S&T-PRISM Initiative: The Ministry of Mines in India is promoting innovation through the Science & Technology – Promoting Innovation in Minerals (S&T-PRISM) initiatives. This includes a focus on the extraction of strategic, critical, and rare earth elements at the elemental level.
Auction Success: Out of 38 critical mineral blocks put up for auction, 14 have been successfully auctioned. This indicates a generally positive response from bidders, which the government considers satisfactory, thus suggesting no immediate need for further policy intervention.
WAY FORWARD:
Technological Advancements and International Collaboration: Bridging the technology gap in mining and processing facilities is essential. India should foster domestic innovation and form strategic international partnerships and joint ventures to enhance its mining and processing capabilities.
Establishment of a National Institute for Critical Minerals: Drawing inspiration from Australia’s CSIRO, India could establish a Centre of Excellence for Critical Minerals (CECM) within the Ministry of Mines. This center would focus on pioneering research in discovering and extracting critical minerals using advanced geological knowledge, data analytics, modeling, and machine learning capabilities.
Commonwealth Scientific and Industrial Research Organisation: (CSIRO):
CSIRO is an Australian Government corporate entity and one of the world’s largest mission-driven multidisciplinary science and research organizations.
But it is also the largest minerals research and development organisation in Australia and one of the largest in the world.
Supportive Policy Environment: Creating a supportive policy environment is essential. This includes implementing clear regulations and providing incentives for exploration, processing activities, and investments in the critical minerals sector. Policies should encourage both domestic and foreign investment to bolster the entire mineral value chain.
Economic and Industrial Policy Alignment: Strategic policy interventions, such as exemptions from customs duties on critical minerals, should be implemented to reduce import dependency and stimulate domestic production. For instance, the budget 24-25 has removed import duties on copper concentrate, which is expected to increase the competitiveness of domestic refiners by reducing costs and dependency on imports.
Enhanced Research and Development (R&D) Focus: Strengthening R&D capabilities is vital for innovation in the extraction and processing of critical minerals. Initiatives like the S&T-PRISM should be expanded to bridge the gap between development and commercialization, providing necessary funding and mentorship to startups and MSMEs engaged in innovative mining technologies.
Engagement in Bilateral and Plurilateral Agreements: India must actively engage in bilateral and plurilateral arrangements to build assured and resilient critical mineral supply chains. This would help mitigate risks associated with geopolitical tensions and market fluctuations, ensuring a steady supply of essential minerals.
PRACTICE QUESTION:
Q. Discuss the significance of critical minerals in India's development and challenges in securing a sustainable supply of critical minerals. (15 marks, 250 words)
