India's Critical Minerals Mission Driving Sustainability & Self Reliance
Ritesh Kumar
In the race for economic dominance, a new treasure hunt has begun - the pursuit of critical minerals. These minerals, deemed essential for everything from smart-phones to fighter jets, have become the hidden drivers of progress. As the world hurtles toward a future powered by clean energy and digital marvels, the appetite for critical minerals have become insatiable. Since 2017, the energy sector's requirement of lithium has tripled and cobalt and nickel have witnessed a 70% and 40% jump, respectively, in demand. This hunger has bloated the market for key minerals to a staggering USD 320 billion in 2022, and it's just getting warmed up. The International Energy Association (IEA) forecasts demand to double by 2030. Key demand drivers of critical minerals are:
Defence Technologies: Critical minerals like cobalt, tantalum, and rare earth elements are essential for manufacturing advanced weapons systems, radars, and communication equipment. Securing their supply chain strengthens India's defence capabilities, reducing dependence on foreign sources and ensuring resilience in times of conflict.
Cybersecurity: The growing digital landscape relies heavily on critical minerals like lithium and gallium for semiconductors and chips, powering everything from national grid infrastructure to cyber defence systems. Secured access to these minerals helps strengthen India's cyber defence against external threats.
Energy Security: Renewable energy technologies like solar panels and wind turbines depend heavily on critical minerals like copper, lithium, and rare earth elements. By securing domestic or reliable international sources of these minerals, India can reduce its dependence on fossil fuels and enhance energy selfreliance which is vital for national security.
Clean Energy Transition: The clean energy revolution, crucial for combating climate change, relies heavily on critical minerals like lithium, cobalt, and nickel for batteries, electric vehicles and energy storage systems. Access to these minerals empowers India to shift towards renewable energy sources, reduce carbon emissions, and thereby contribute to global climate goals.
Resource Efficiency: Critical minerals can also play a role in developing lowcarbon technologies and promoting resource efficiency. For example, rare earth elements enable the development of high-efficiency motors and energy-saving lighting technologies.
Economic Development: Building a critical minerals industry can create new jobs, attract investments, and boost local economies in resource-rich regions within India. This can contribute to poverty alleviation and sustainable development, and achieve climate change goals.
The Geopolitical Maze
Unlike abundant sunshine and wind, critical minerals are concentrated in the hands of a few players. China, for instance, dominates lithium processing, while DR Congo holds a monopoly on cobalt. This dependence creates a precarious situation, where geopolitical winds can send prices soaring and derail clean energy goals. Add volatile markets to the mix, and you have a recipe for uncertainty. This unpredictability can stifle investments and stall crucial projects. Resource-rich countries are eyeing a bigger slice of the green pie. Mining operations are likely to face higher taxes, potentially driving up mineral costs and impacting clean energy affordability. Moreover, nationalisation waves are crashing on mining companies as countries assert control over their critical minerals wealth. Chile's lithium ambitions and Mexico's revamped mining code are just a few examples, thereby raising concerns about supply disruptions and price manipulation. Environmental, Social, and Governance (ESG) issues are also common where many critical minerals are extracted or processed. For example, child labour, forced labour, and corruption were the most publicly reported governance related risks in the supply chain between 2017 and 2019. In addition, there are a host of environmental issues such as land degradation, habitat damage, and water stress - copper and lithium are particularly vulnerable due to their high water requirements. ESG issues and the monopolies of supply mean that the supply chain is opaque, complex and susceptible to disruptions and price volatility.
While free trade agreements and strategic partnerships can reduce dependence on single suppliers and foster a more flexible landscape, encouraging domestic exploration and processing can lessen reliance on imports and create jobs. India's Mines and Minerals (Development and Regulation) Act, Europe's Critical Raw Materials Act and the US's Inflation Reduction Act are steps in this direction. Furthermore, just like for oil, stockpiling critical minerals can provide a safety net against sudden shortages and geopolitical shocks. Responsible mining practices and recycling initiatives can ensure long-term resource availability and minimise environmental damage.
India's Critical Minerals Gambit
Recognising their importance, India has identified 30 critical minerals and established a framework for mining them within its own borders, and the recent auction of 20 critical mineral blocks is a bold step towards Aatmanirbharta (selfreliance). Lithium takes center stage in this auction as this battery-powerhouse mineral is fueling the electric vehicle revolution, a crucial component of India's climate change mitigation agenda. But this auction is not just about lithium. From Tamil Nadu's seven mineral-rich blocks to Jammu & Kashmir's treasure trove of titanium, the auction spans eight states, showcasing India's diverse mineral map. This strategic dispersal of identified hotspots not only aims to unlock the nation's potential, reducing dependence on foreign imports, but also foster equitable regional growth.
The auction structure itself is interesting. Four blocks are up for immediate mining licences, ready to be exploited after clearing environmental and social hurdles. These quick-start blocks, like the molybdenum mines in Tamil Nadu, promise immediate returns. However, for the remaining blocks, exploration comes first. These blocks come with "composite licences" allowing companies to dig deeper and assess the mineral wealth hidden beneath the surface. Only after uncovering enough treasure can these licences be converted into mining licences, paving the way for full-fledged extraction.
But the path to mineral riches isn't always paved with gold, or in this case, lithium. Before shovels hit the ground, companies must navigate a gauntlet of 15 approvals including environmental clearances and consent from local communities. Balancing resource extraction with ecological responsibility will be key to ensuring sustainable mining practices.
The auction's implications go beyond numbers and reserves. It signifies a shift in India's economic strategy, one that recognises the power of critical minerals in shaping the future. This auction is not just about digging for rocks; it's about digging for a stronger and selfreliant India, poised to compete on the global stage in the age of advanced technology.
Understanding the Minerals' Roles
In a low-carbon economy, electric vehicles will be a common form of transport. Solar panels, wind farms, and nuclear power will provide the electricity we need. Green hydrogen will heat our homes and fuel heavy industries and transport. Energy storage will be needed for our electricity grid and for our homes. Critical minerals are integral to all of these technologies.
· Lithium: The "white gold" of the clean energy era, lithium forms the backbone of rechargeable batteries powering EVs, electronics, and energy storage solutions. Its secure supply is paramount for India's EV ambitions and grid modernisation.
· Niobium: This versatile element finds applications in jet engines, superconducting magnets, and high-strength alloys, playing a crucial role in clean energy infrastructure and advanced transportation technologies.
· Rare Earth Elements: This diverse group of 17 minerals fuels a vast array of clean energy technologies, including wind turbines, electric motors, and catalysts. Securing sufficient REE reserves is essential for India's green energy ambitions and technological self-reliance.
Economic and Regulatory Framework
By carefully balancing economic incentives with responsible resource management, India can leverage its critical mineral, potential to not only achieve its Net Zero goals but also build a thriving green economy. This approach presents both challenges and opportunities, demanding meticulous planning, technological advancements, and strategic partnerships. The economic dynamics surrounding critical minerals are complex, with concerns about availability, security, cost, and environmental impact. By amending the Mines and Minerals (Development and Regulation) Act, the Government has sought to boost India's selfsufficiency in critical minerals which is vital for the clean energy transition and national security. By opening exploration and mining of key natural resources like lithium and cobalt to the private sector, streamlining auction processes, and introducing exploration licences for deep-seated minerals, the legislation incentivises foreign investment, accelerates production, and reduces dependence on imports, paving the way for a secure and prosperous future. India's strategic mission to achieve self-reliance in critical minerals can be thus summarised:
· Auction of Critical Mineral Blocks: The recent e-auction of 20 critical mineral blocks, including lithium and rare earth elements, marks a watershed moment. This initiative aims to diversify India's mineral resource base, reduce import dependence, and foster sustainable resource management. Attracting investments and bolstering domestic production are crucial for powering India's industrial and technological advancement in the clean energy era.
· Exploration Licence: Recognising the challenges of extracting deep-seated minerals like cobalt and lithium, the government has introduced the Exploration Licence. This innovative approach empowers companies to undertake reconnaissance and prospecting, paving the way for collaboration with international expertise and technology adoption.
· National Mineral Exploration Trust (NMET): NMET has played a pivotal role in funding and driving regional mineral exploration. With over 270 projects completed and 108 ongoing, NMET is unlocking India's hidden mineral wealth. This comprehensive approach, encompassing domestic exploration, international partnerships, legal reforms, and technological advancements, paints a picture of a proactive India, strategically securing its critical minerals future.
· Royalty Rates: In a significant move, the Centre recently set royalty rates for three key players - lithium, niobium, and rare earth elements (REEs) with the intent of balancing incentives and revenue. The royalty rate of Lithium set at 3% of LME (London Metal Exchange) prices reflects the government's intent to incentivise domestic mining while ensuring fair financial returns. This aligns with India's recent discovery of lithium deposits in Jammu & Kashmir and its bid to reduce dependence on imports, which stood at a staggering Rs 23,171 crore in FY23. The lower royalty rates for niobium and REEs compared to lithium suggest a different strategic approach. These minerals, while crucial for clean energy technologies like wind turbines and electric motors, might require additional incentives for domestic exploration and extraction to become commercially viable.
· Khanij Bidesh India Ltd. (KABIL): One key initiative is the establishment of Khanij Bidesh India Ltd. (KABIL), a joint venture targeting critical minerals assets abroad, particularly in hotspots like Australia, Argentina, and Chile. This proactive approach ensures a long-term supply of essential minerals, mitigating dependence on volatile global markets.
Conclusion
India's recent auction of 20 critical mineral blocks must be assessed not as a singular event, but as a calculated leap on a precarious path. While heralded as a significant step towards self-reliance and clean energy dominance, the true impact of this gambit demands a critical lens that dissects its potential, pitfalls, and broader implications.
On the surface, the auction's merits are undeniable. It represents a strategic shift from import dependence to domestic resource mobilisation, aiming to fuel India's clean energy ambitions and national security. The geographical diversification, inclusion of quick-start blocks, and exploration licences, all hold promise for unlocking India's hidden mineral wealth and fostering regional development.
However, beneath this optimistic veneer lie formidable challenges. Navigating the labyrinthine thicket of environmental approvals, balancing resource extraction with ecological imperatives, and overcoming the technical complexities of deep-seated mineral deposits are no small feats. Additionally, concerns linger regarding transparency in the auction process, potential environmental degradation, and the equitable distribution of benefits from resource extraction.
Furthermore, the success of this gambit hinges on factors beyond the auction itself. The efficacy of entities like Khanij Bidesh India Ltd., and the judicious setting of royalty rates will all play crucial roles in determining the ultimate outcome. Moreover, India's quest for critical mineral selfreliance cannot be divorced from the global geopolitics of resource extraction. Navigating volatile markets, managing dependencies on external suppliers, and ensuring responsible sourcing practices within both domestic and international contexts will be essential for long-term sustainability. The willingness to course-correct as needed will also be crucial. Only through such vigilance and adaptability can India ensure that its critical minerals gambit leads not to precarious pitfalls, but to a truly self-reliant and sustainable future.
(The author is Delhi Correspondent of an international multi-media news platform. Feedback on this article can be sent to: feedback.employmentnews@ gmail.com)
Views expressed are personal