Why India needs to secure its critical minerals supply chains

Published on Sep 09, 2022 05:32 PM IST

The article has been published by Rajesh Chadha, senior fellow at Centre for Social and Economic Progress (CSEP) and Ganesh Sivamani, research associate, CSEP

Critical minerals are mineral resources, either primary or processed, which are essential for the production processes of an economy and for the national security of the country. 
Critical minerals are mineral resources, either primary or processed, which are essential for the production processes of an economy and for the national security of the country. 
ByHindustan Times

During the 26th session of the Conference of Parties, India committed to meeting half of its electricity requirements from renewable sources by 2030 compared to a quarter today, reducing the economy’s carbon intensity to less than 45% cent in 2030 compared to 2005 levels, and achieving the net-zero emissions target by 2070. Achieving these goals would require a sharp ramp-up in the deployment of green technologies, including solar panels, wind turbines, and electric vehicles. Minerals, including cobalt, copper, lithium, molybdenum, nickel, and rare earth elements, play a critical role in the manufacture of these requisite equipment.

Critical minerals are mineral resources, either primary or processed, which are essential for the production processes of an economy and for the national security of the country. Their supplies may be disrupted due to a lack of availability or unaffordable price spikes. Additionally, these minerals lack substitutes and have low end-of-life recycling rates, which increases their supply risks. The geographic concentration of mining and processing of the minerals may also adversely impact their availability – particularly if they are mined or processed in only one or a handful of countries. While many of these critical minerals are mined in Australia, China, Democratic Republic of Congo, and South America, much of the processing of these minerals take place in China. For example, three-fifths of rare earth minerals, essential for clean energy, electronics, and defence technologies, are mined in China, while more than fourth-fifths are processed there.

While India is endowed with and produces over 85 minerals, some of the required critical mineral assets for the country’s manufacturing sectors (particularly of green technologies) are not yet ready to be mined. There are also some critical minerals of which there exists no known resources within the country. To secure these minerals for the manufacturing sector, India would need to develop trade agreements and supply chains with other mineral-endowed countries.

Currently in India, a joint venture of three Central Public Sector Enterprises, Khanij Bidesh India Ltd. (KABIL), is taking charge of ensuring mineral security through facilitating supply chains, mine asset acquisitions, and G2G collaborations. A notable achievement of KABIL was the signing of an MoU between the Indian and Australian governments for co-operation in the field of mining and processing of critical minerals. However, much more must be done to secure India’s global mineral supply chains, including the private sector involvement.

Other countries have recently taken sizeable steps to securing their mineral supplies. The multilateral Minerals Security Partnership (MSP) was announced in June 2022, with the goal of bringing together countries to build robust critical minerals supply chains needed for climate objectives. Involved in this partnership are the United States (US), Canada, Australia, Republic of Korea, Japan, and various European countries. While India is not included, it would be desirable to participate in such multi-country dialogues.

This is especially important in the context of recent global geo-political factors adversely affecting critical minerals supply chains, starting with the Covid-19 pandemic and followed by the Russia-Ukraine war. These supply chains may also be impacted due to a country’s trade policies. One example is Indonesia – host to the world’s largest nickel reserves – which has banned the export of raw nickel ore, as they seek to develop a domestic nickel processing industry. Another example is China, which has recently explored reducing the exports of certain rare earth minerals required in the manufacture of some defence equipment. India must strategise policies now to overcome potential challenges arising from likely supply chain disruptions.

Many countries, including the US, Japan, China and the European Union, have periodically assessed the criticality of various minerals specific for their respective needs and contemplated the price and risk mitigation mechanisms. However, India lacks in making similar periodic assessments and being battle-ready regarding supply resilience of critical minerals.

A recent study by the Centre of Social and Economic Progress (CSEP) assessed the criticality levels of select 23 minerals for India’s industrial sector, with a focus on the future needs for green technologies manufacturing. It highlights that India shall require much higher quantities of critical minerals for manufacturing electric vehicles and renewable energy technologies (solar panels, wind turbines, and hydroelectric turbines). These minerals include copper, indium, manganese and zinc for the manufacture of renewable electricity generation equipment, and increasing quantities of cobalt, copper, lithium, and rare earth elements for the manufacture of electric vehicles and the battery storage needed to balance a more renewables-intensive electricity grid.

On the domestic front, India can do much more in bringing out more critical mineral mining assets for production, including more focused exploration and increasing the number of mining assets brought out for auction. There is a proposed amendment to the Mines and Minerals (Development and Regulation) Act, 1957 which would empower the government to auction mining concessions of certain critical minerals, which were previously only allowed to be mined by government companies. While domestic mining may not be enough for the large quantum of minerals needed for green technologies manufacturing, their import dependencies can be lessened. This would also bring in more jobs and boost the economy with intersectoral linkages to the manufacturing sectors, which is especially beneficial as some of the most impoverished people in the country are living above vast quantities of valuable mineral resources. However, of course, increased mining and processing must not come at the expense of environmental and social obligations.

India must take lessons from other advanced economies on how they are planning to secure their mineral needs and attempt to join multinational fora on assuring critical mineral supply chains – or use existing partnerships, such as Quad and BIMSTEC, to foster such dialogues. There must also be top-level decision making within the government to strategise on how to create vertically integrated supply chains of green technologies manufacturing, or we may be in serious danger of missing out on our climate change mitigation targets.

The article has been published by Rajesh Chadha, senior fellow at Centre for Social and Economic Progress (CSEP) and Ganesh Sivamani, research associate, CSEP

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