Critical Minerals – These are India’s Initiatives to Strengthen the Value Chain and Future Opportunities

Rishabh Jain Council on Energy, Environment and Water (CEEW), and Vivek Chandran, Shakti Sustainable Energy Foundation, March 18, 2024

Published by: cnbctv18.com on Mar 15, 2024

India has taken some commendable steps and initiatives at national and international levels to increase country’s participation in critical minerals and clean energy value chain, writes CEEW’s Rishabh Jain and Shakti Sustainable Energy Foundation’s Vivek Chandran.

Critical minerals are often called the ‘new oil’ since they find significant use in clean energy technologies required for the energy transition. Critical minerals such as lithium, nickel, copper, cobalt, silicon, graphite, and rare earth elements (REE) are used in technologies such as solar modules, wind turbines, transmission networks and batteries.

The rising demand for clean energy has translated into an increased demand for critical minerals with an expected four-fold increase by 2040, according to the International Energy Agency. Additionally, the concentration of mineral reserves and their processing in a few countries raises significant concerns about supply chain vulnerabilities, with potential disruptions stemming from natural disasters or geopolitical conflicts.

This scenario is particularly alarming for developing economies like India, where delays in bringing new mineral resources online could exacerbate demand-supply imbalances and drive up prices, impacting economic growth, manufacturing ambitions, and the transition to clean energy.

Steps To Overcome These Challenges

India has taken some commendable steps and initiatives at national and international levels to increase country’s participation in critical minerals and clean energy value chain. At the national level, the Ministry of Mines identified 24 minerals that are critical and strategic for India.

Typically, the country’s mineral resources are auctioned by the state governments. However, in a bid to increase exploration and mining of critical and strategic minerals, they shall now be auctioned by the central government. The revenue generated from such auctions will continue to accrue to the state governments and increased mineral findings may lead to more revenue for the states.

Furthermore, to fast-track the exploration of critical minerals, private agencies are incentivised to take up the task via Exploration Licences for deep-seated and critical minerals. The decision to delist six minerals, including lithium from the atomic minerals list has facilitated private sector entry into the exploration and mining of these resources. This was followed by the launch of auction of 20 critical and strategic mineral blocks. 

Internationally, through bilateral and multilateral engagements, India has been participating in many discussions that can potentially solve not just India’s but the global challenge of critical minerals.

For instance, under India’s leadership, for the first time, the G20 discussed and agreed to strengthen the global critical mineral value chain. India was also invited as the only developing country to join the Mineral Security Partnership (MSP). Membership in MSP carries a lot of opportunity for India to represent the interests of the developing countries that are most vulnerable to global supply chain shocks.

India also partnered with Australia, through the India-Australia Comprehensive Economic Cooperation Agreement (CECA) in 2022, to collaborate on upstream critical mineral technologies. More recently, Khanij Bidesh India Ltd (KABIL) has signed a US$24 million lithium exploration and mining pact for 5 lithium blocks with Argentina.

Going forward, India can scale up such partnerships and even leverage other multilateral forums like the Quad, Indo-Pacific Economic Framework for Prosperity (IPEF), or European Critical Minerals Club to get access to minerals from other geographies.

According to a study by the Council on Energy, Environment and Water (CEEW), just 15 countries hold at least 55% of the identified critical minerals, indicative of concentration in critical minerals supply.

Here are four key opportunities that various stakeholders in India can tap into to strengthen critical mineral value chain:

First, the government and industry should urgently look to build technological capability in critical mineral exploration, mining and processing with a focus on India’s geology. The grades of material required in clean energy technologies are often higher than for competing uses of these materials, requiring the adoption of specialised techniques for processing and refining. It is important to increase awareness and urgency about this gap among Indian industries, startups and R&D institutions. The Ministry of Mines has been conducting awareness events and more can be done in partnership with academic institutions.  

Second, India should build on its Lifestyle for the Environment (LiFE) mission and the G20 Voluntary High-Level Principles for Collaboration on Critical Minerals for Energy Transitions to infuse circularity into the critical mineral value chain. The reuse and recovery of critical minerals from electronics and clean energy equipment waste can help meet the demand in the long run and also encourage sustainable consumption practices.

Third, Indian industries should be urged to embrace the highest environmental, social and governance (ESG) norms as they enter into the critical minerals supply chain. The global discourse on critical minerals highlights demand for enhanced transparency and traceability in supply chains. Indian enterprises should adopt superior ESG practices that will position their products to command a premium over products with little to no transparency and traceability.

Finally, many countries are looking to build domestic capabilities in mineral processing and clean energy manufacturing through financial incentives and trade barriers. Given that many clean energy manufacturing facilities under India’s ambitious Production-Linked Incentive (PIL) Schemes will come online in the next few years, it will be important for India to negotiate agreements with large demand markets such as the US, Europe, and Japan. Such negotiations are crucial to avoid trade barriers, and secure supportive measures that can otherwise reduce the competitiveness of Indian manufacturers. 

As many countries look to diversify their procurement, India can become a strategic and reliable node for countries that are looking to strengthen their critical mineral supply chain. A stable and progressive policy framework coupled with a large domestic market can provide a competitive edge to domestic industry. 

—The authors;  Rishabh Jain is Senior Programme Lead at the Council on Energy, Environment and Water (CEEW), and Vivek Chandran is Director (Climate Insights | Critical Raw Materials) at Shakti Sustainable Energy Foundation. The views expressed are personal.

(Edited by : C H Unnikrishnan)

https://www.cnbctv18.com/economy/critical-minerals-india-initiatives-strengthening-the-value-chain-future-opportunities-rishabh-jain-vivek-chandran-19287381.htm

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