The 2023-24 Economic Survey tabled in the Parliament on 22 July identified India’s critical mineral dependence on China as a major concern and called upon the government to ‘recognise and deal with challenges posed by dependence on China for critical minerals.’ The Economic Survey notes that rare earth minerals and other critical minerals such as lithium, cobalt, graphite, etc. are essential for clean energy transition, and “they are among the least geographically diversified of all key energy transition minerals and that this concentration of rare earth and critical minerals in mining and processing is a significant constraint on the use of renewables and EV (Electric Vehicle) ambitions for most countries, including India.” In the 2024 Budget speech, the Indian Finance Minister announced the government’s plan to launch a Critical Mineral Mission to secure the minerals for India through domestic production, recycling, and overseas acquisition.
In the background of economic tensions between the United States (US) and China, both countries have resorted to tit-for-tat strategy. While Washington restricted exports of semiconductor chips and associated technologies; Beijing has banned exports of critical minerals such as gallium, germanium, and graphite and imposed an official embargo on the export of rare earth processing technologies. China’s attempt at leveraging its position as the dominant supplier of several critical minerals will create additional challenges for other countries.
The Indian government’s Critical Mineral Mission is not an outcome of any sudden realisation. It is the result of twin concerns; firstly, China’s dominant position in the critical mineral supply chain, and secondly, slow progress in India’s efforts to kickstart domestic mining of critical minerals. Additionally, to limit global warming, India has committed to reducing emissions by 45 percent below 2005 levels by 2030 for which transition to clean energy is essential.
China’s attempt at leveraging its position as the dominant supplier of several critical minerals will create additional challenges for other countries.
In a response to a question in the Parliament, the Indian government stated that the country is fully dependent on imports for its lithium requirements, with China alone accounting for 70 to 80 percent of India’s lithium and lithium-ion imports. India is also dependent on China for meeting 60 percent of its natural graphite imports. Both are extremely crucial for the battery and Electric Vehicle (EV) industry. In addition, India’s reliance on imports for cobalt, nickel and copper is between 93 to 100 percent. In the FY 2023-24, India spent over INR 34,000 crores on importing these four minerals.
In 2023, India established a committee to identify the minerals that are crucial for economic development. After examining the critical mineral lists and strategies of countries like Australia, Canada, the US, Japan, and South Korea, the committee came out with a list of 30 critical minerals, taking into account their economic importance and supply risk.
According to International Energy Agency’s Global Critical Mineral Outlook 2024, China’s share of refined critical mineral production has increased over the last four years. The US and its allies have taken initiatives to strengthen multilateral collaborations to address China’s near monopoly over a critical mineral supply chain. The US-led Mineral Security Partnership (MSP) established in June 2022 addresses four major critical minerals challenges by firstly, “Diversifying and stabilising global supply chains; secondly, investment in those supply chains; thirdly, promoting high environmental, social, and governance standards in the mining, processing, and recycling sectors; and fourthly, increasing recycling of critical minerals”.
The US and its allies have taken initiatives to strengthen multilateral collaborations to address China’s near monopoly over a critical mineral supply chain.
India joined the MSP as its 14th member in June 2023 following which it has made efforts to acquire critical mineral assets abroad through the Khanij Bidesh India Ltd. (KABIL). KABIL, incorporated in 2019, has been spearheading India’s efforts to secure long-term supply of critical minerals such as lithium and cobalt from Australia, Argentina, and Chile. In January 2024, KABIL signed an agreement with Argentina for exploration rights for commercial production for five lithium blocks. However, commercial production from mines is a time-consuming process and any benefits may only accrue in the future. Additionally, as only state-owned mining companies are likely to participate in the exploitation of mines abroad, the unavailability of required technologies and expertise may prove to be a hindrance. Therefore, in the near term India and other countries would likely remain dependent on China for critical minerals supplies.
In the last few years, the Geological Survey of India (GSI) has shifted its focus towards exploration of deep-seated and critical minerals. Despite the increased focus on critical mineral exploration, the government is unable to find takers for most of the mineral blocks it is offering for exploration. Since November 2023 the ministry of mines has carried out four rounds of auctions totalling 49 critical mineral blocks. But most of the mineral blocks have remain unsold due to insufficient number of bids.
The lack of response from domestic mining industry could be attributed to various reasons, prominent among them is the unavailability of extraction and processing technologies within India, thus making India completely dependent on imports from China. Critical and minerals which are available deep underground such as cobalt, lithium, nickel, and copper are difficult to explore and mine as compared to those available closer to the surface. Unless the government focuses on acquiring the processing technologies or companies invest in R&D to establish their own refining facilities, the creation of a domestic critical mineral supply chain will take time.
Talking about the global race for access to critical minerals which has been fuelled by the plans to transition to green energy, the economic survey points out that ‘China has positioned itself as an indispensable source of several of these materials. Securing supply in crunch times is a matter of concern.’ The Union Finance Minister announced plans to set up Critical Minerals Mission in addition to reducing import duties in the 2024 Budget on various critical minerals in a bid to mitigate India’s critical minerals dependence on China.
The Government of India is hoping that its new policy will enable setting up of processing and refining of various critical minerals within the country and help secure their availability for the strategic sectors.
This is in stark contrast to the US strategy of reducing China’s dominance by imposing additional tariffs on imports of critical minerals, batteries, solar cells, and semiconductors from China and simultaneously making policies to boost domestic production. The Survey realistically highlights that “while Emerging Markets and Developing Economies (EMDEs) are resorting to import restrictions as a policy option to deal with the Chinese challenge, it is pertinent to note that some Chinese goods are so cheap that no amount of tariff can reduce their price competitiveness. Further, some Chinese products can move past these restrictions without being noticed since they are packaged in third countries.” The Government of India is hoping that its new policy will enable setting up of processing and refining of various critical minerals within the country and help secure their availability for the strategic sectors.
While the formulation and execution of India’s Critical Mineral Mission is awaited, the discussion on it in the Budget is a positive start. India has been paying attention to global development with regards to the demand for critical minerals and has taken steps in the right direction. India has been acquiring stakes in critical minerals mines abroad but it also needs to pay more attention towards developing its extractions and refining industry for critical minerals mined domestically. While the Ministry of Mines appointed committee identified a list of 30 critical minerals that it deems important for industries; the government is yet to take any action on the committee’s recommendation of setting up a Centre of Excellence for Critical Minerals (CECM) to formulate India’s critical mineral strategy. A whole-of-government strategy would be crucial if India has to compete with China and other actors and secure its interests in the critical mineral space.
Ankit Kumar is presently doctoral scholar at the Department of Security Studies, School of National Security Studies at Central University of Gujarat.
Arun Vishwanathan is Professor & Head, Department of Security Studies, School of National Security Studies, Central University of Gujarat.
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Ankit Kumar is presently doctoral scholar at the Department of Security Studies, School of National Security Studies at Central University of Gujarat. He is a ...
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Professor Arun Vishwanathan is Professor & Head, Department of Security Studies, School of National Security Studies, Central University of Gujarat. Earlier he taught at Dept. ...
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