NEW DELHI: The disruption of global supply chains due to the Covid-19 pandemic and the subsequent Ukraine crisis could derail India’s plans to become a net zero nation by 2070. Net zero essentially means achieving zero emissions of greenhouse gases—the main culprit behind climate change—by using clean (non-fossil fuel) energy and removing or absorbing the remaining emissions using cutting edge technology.
To achieve this, however, requires large amounts of critical minerals. Lithium and graphite, key ingredients for batteries of electric vehicles, are just two of them. In a paper titled ‘Assessing the Criticality of Minerals for India 2023’, the Centre for Social and Economic Progress (CSEP) defines critical minerals as ‘mineral resources, both primary and processed, which are essential inputs in the production process of an economy, and whose supplies are likely to be disrupted due to risks of non-availability or unaffordable spikes’.
The paper adds 20 more minerals to an earlier list of 23 critical minerals based on their economic importance and supply risks. Minerals like antimony, cobalt, gallium, graphite, lithium, nickel, niobium and strontium, among others are critical for meeting India’s green tech, high tech-equipment, aviation and national defence manufacturing needs. However, despite having a significant mineral geological potential, many minerals are not easily available domestically, it says, underlining the need for a national strategy to ensure resilient supply chains to ensure their availability.
It also notes that the International Energy Agency has identified vulnerabilities in resilient supply chains of critical minerals required for the green transition, which include “the high geographical concentration of production and processing, long project development lead times, declining resource quality, growing environmental and social performance scrutiny, and higher exposure to climate risks”.
“For example, China produces 60% of the world’s rare earth elements (REEs) and 34% of molybdenum. Around 69% of cobalt is mined in the Democratic Republic of Congo, with China having a majority in processing (65%) of the global mineral supply. Australia produces 52% of the world’s lithium, with China being a major importer and processor of 58% of the global supply. South Africa mines 72% of the world’s platinum output,” the paper notes.
China, said to have 14 per cent of global lithium reserves and three fifths of the world’s rare earth minerals (critical for clean energy, electronics, and defence technologies), has not only secured major mining and extraction rights for critical minerals across the world, it has also invested in processing plants which handle over 60 per cent of global refining of cobalt, lithium and rare earth elements. Russia holds significant reserves of nickel, palladium, titanium sponge and scandium, while Ukraine is a major producer of titanium and other critical minerals.
NITI Aayog Vice Chairperson Suman Bery, who delivered the keynote address at a brief panel discussion which preceded the formal release of the paper, began by noting that the mining industry needed attention if India wanted to ramp up production of these key minerals.
The government’s focus on self-reliance implied India would get more energy security if the minerals were domestically extracted and processed, although he personally felt massive diversification was a better way to deal with it. Also, India’s electric vehicle policy was fundamentally different from that of the ‘big boys’ (China, the EU and the U.S.) in the sense that it focused more on public transport and two and three wheelers, he added.
Bery concluded with a reference to the joint statement released after Prime Minister Modi’s recent state visit to the U.S which “pledged to hasten bilateral collaboration to secure resilient critical minerals supply chains through enhanced technical assistance and greater commercial cooperation, and exploration of additional joint frameworks as necessary.”
“Solving the mining problem is essential, which is a federal problem. If there are other accelerators, I don’t know if they have been adequately identified, the mines ministry needs to identify those. But for aatmanirbharata to imply that we can be self-sufficient at a time for a scramble, is probably wrong, and so the diplomatic and cross border dimensions, the FDI dimensions and the investment treaty dimensions become as important as the overall architecture,” he concluded.
The panelists for the session, chaired by CSEP president emeritus Rakesh Mohan and moderated by CSEP senior fellow Rajesh Chadha, included Joint Secretary, Ministry of Mines Veena Kumari Dermal, Former Foreign Secretary Ranjan Mathai and Managing Director, Tata Steel Mining, Pankaj Satija.
The discussions revolved around the urgent need to induct private players in the mining sector, quickly funding and building processing facilities for critical minerals, acquiring mining rights abroad for minerals not available domestically and setting up pacts with countries which have minerals or processing facilities that India lacks.
Khanij Bidesh India (Kabil), a state-owned joint venture with the mandate to explore and exploit opportunities to process strategic minerals overseas for use in India, is said to be close to signing an agreement with Argentina to secure a few lithium mining blocks there. In July 2022, India and Australia launched a Critical Minerals Investment Partnership, which aims at increasing cooperation between the two nations on mining and critical minerals, and the easing of tariffs on specific minerals.
And just before Prime Minister Nodi’s visit to the U.S., India was inducted into the Minerals Security Partnership (MSP), a U.S.-led initiative comprising Australia, Canada, Finland, France, Germany, Japan, the Republic of Korea, Sweden, the United Kingdom, the European Union, set up last year to bolster critical mineral supply chains to ease the dependence on China, Russia and Ukraine.
All this however, requires major coordination and cooperation among various ministries, the building of knowledge networks, and the revision of some laws, including the mines and minerals act, which classifies several critical minerals as atomic minerals, which can only be mined by government undertakings. Similarly, environmental laws might require tweaking to allow responsible mining of some critical minerals which cannot otherwise be extracted.
“India must also consider what role to play in the downstream critical mineral value chains,” says the paper. “China, for example, has developed an efficient domestic lithium processing industry, which benefits from being a part of a larger supply chain, economies of scale, and years of expertise. If India is to compete in this market, substantive investments and additional skills will be required – perhaps with the help of strategic partners like Australia,” it suggests. Also, “Environmental and social externalities must also be considered for mining and processing operations. For example, lithium processing consumes large quantities of water, and the waste streams may contaminate the air, water, or land, which would have adverse health impacts on local communities. India may simultaneously consider owning foreign assets in critical mineral supply chains.”
And finally, a “G20 (where India is the current president) Critical Minerals Security Partnership” (G20-CMSP) could be created through an active partnership between the developing and the developed member countries. The CMSP should ensure a resilient supply chain of critical minerals, including stockpiles of various minerals stored in different member countries as per their respective comparative advantages in extraction and processing,” it concludes.
Related Links:
Critical Minerals and Materials: Managing Supply Chain Constraints
“India-Australia Critical Minerals ,Tech Cooperation, Pension Fund Investments Extremely Important”
Minerals Security Partnership To Cut Dependence On China, India Is Out Looking In
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