This essay is part of the series "Budget 2024-25"
The Union Budget 2024-25 has brought some interesting news for those tracking the critical minerals space. Not only has the government reduced tariffs on imports of certain critical minerals, but it has also announced a flagship Critical Minerals Mission. That critical minerals are getting much needed attention is indicative of a pragmatic view of what will drive productivity and growth in the country. Availability of critical minerals and the capacity to use them efficiently significantly implicate both digital and green transition efforts.
The Union Budget 2024-25 has brought some interesting news for those tracking the critical minerals space. Not only has the government reduced tariffs on imports of certain critical minerals, but it has also announced a flagship Critical Minerals Mission.
The tariff reduction (as seen in Table 1) by itself is of little use, given the lack of processing capacity in the country. It is important to note that alongside the reduction in tariffs for critical minerals, some precious metals like platinum and iridium, which are used at various stages of production in the Electronics System Design and Manufacturing (ESDM) sector, have also seen their tariffs reduced. This is a good indicator of the commitment to the vision of making India a hub for ESDM products. A holistic approach will also help streamline upcoming trade negotiations with the European Union (EU) and encourage Free Trade Agreement (FTA) negotiations with other countries with reserves of minerals that are at risk of supply disruption.
Critical Minerals Mission
The minerals for which tariffs have been reduced were identified by the Ministry of Mines as those with High-Economic Importance and High Supply Risk in their 2023 report. The Critical Minerals Mission, (CMM) if formulated and implements correctly, will ensure effective utilisation of these minerals and reduce the supply risk posed by both geopolitics and natural limitations. It is indicative of a whole-of-sector approach that should be welcomed. It has the potential to give a fillip to new industries within the country, could help us expand our sources of raw materials, and therefore add stability and resilience to the supply chain for critical minerals.
The Critical Minerals Mission, (CMM) if formulated and implements correctly, will ensure effective utilisation of these minerals and reduce the supply risk posed by both geopolitics and natural limitations.
The Budget has set specific aims for the CMM including:
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Boosting domestic production
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Overseas acquisition of critical mineral assets
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Technology development
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Skilling the workforce
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Extended Producer Responsibility Framework
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Financing Mechanisms
The government has also stated its intent to launch the auction of offshore mining blocks, already identified through exploration.
Table 1: Revised Tariffs on Critical Minerals and Precious Metals
Commodity
|
Original Tariff in percentage
|
Revised Tariff in percentage (based on Budget 2024-25)
|
Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium, Germanium, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, Potash, REE, Rhenium, Strontium, Tantalum, Tellurium, Tin, Tungsten, Vanadium, Zirconium, Selenium, Cadmium, Silicon other than Quartz & Silicon Dioxide
|
10/7/5/5/2.5
|
Nil
|
Graphite
|
7.5/5
|
2.5
|
Silicon – Quartz and Dioxide
|
7.5/5
|
2.5
|
Platinum, Palladium, Osmium,
Ruthenium, Iridium
|
15.4
|
6.4
|
Platinum and Palladium used in the manufacture of noble metal solutions, noble metal compounds and catalytic convertors
|
7.5
|
5
|
Source: Budget Speech 2024-25, Ministry of Finance
Objective(ly) Speaking
The objectives of the Critical Minerals Mission can be fully achieved only if certain key steps are taken in the short-term. A report released earlier this year by ORF and PwC had made the argument for an ecosystem approach to the ESDM sector with securing access to critical minerals being a significant recommendation. India’s critical minerals mission, when it is created, could also benefit from an ecosystem perspective.
The objectives of the Critical Minerals Mission can be fully achieved only if certain key steps are taken in the short-term. A report released earlier this year by ORF and PwC had made the argument for an ecosystem approach to the ESDM sector with securing access to critical minerals being a significant recommendation.
Firstly, boosting domestic production and technology development must be balanced with skilling the workforce and implementing rules for responsible mining. This would also mean specific outlays on acquiring efficient technologies from partner countries and ensuring ease of access to the same. The risks to this sector don’t just come from the geographic and non-renewable nature of these resources, but also due to production and extraction technologies. Encouraging mining is not enough; India must also ensure that domestic extraction happens in a sustainable manner.
Second, storage and processing infrastructure would have to be built at pace with the expected imports with the lowered tariffs on critical minerals. While the demand for critical minerals is high, companies operating in India, which need these products, are unlikely to utilise the benefits of lowered tariffs to the full extent without access to infrastructure for safe long-term storage. Refineries and processing units should be a key element of this mission.
Third, the Extended Producer Responsibility Framework for critical minerals should ideally be at par with international standards to encourage a more efficient circular economy. Product recovery and re-use can contribute in a significant way to plug short-term supply gaps.
Fourth, overseas acquisition of critical mineral assets must be done in a fashion that creates win-win scenarios for new suppliers as well as India. This balance could be attained by exploring FTAs with new partners. Early Harvest agreements can be explored with some African and Latin American partners.
Additionally, acquiring and investing in Research and Development (R&D) to process products like Gallium and Germanium, and other Rare Earth Elements (REEs), should be clearly outlined in the mission. This can be done through reviving old projects like the HINDALCO project in Renukoot for Gallium, as mentioned in the 2023 Ministry of Mines report. Addressing gaps in Intellectual Property (IP) acquisition for technologies, and sandboxes for new refining technologies would be an important part of this.
Overall, ensuring that all these moving parts are addressed will be important to ensure resilience in critical mineral supply.
Jhanvi Tripathi is an Associate Fellow at the Observer Research Foundation.
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