India's critical minerals' list likely to spur investment in allied sectors

The declaration of India’s first critical minerals' list and its entry into the US-led Minerals Security Partnership can play a significant role in encouraging investments in related businesses, said industry experts. This can result in enhancing the cost competitiveness of Indian firms at the global scale.

Experts from related businesses feel that with the critical minerals report, the country’s resource potential, policy framework, and technological and R&D needs have clearly been determined. This would lead to players putting in money.

“By offering a clear roadmap and reducing uncertainties, the report can facilitate increased investment in business sectors associated with critical minerals,” said Pankaj Satija, co-chair, FICCI Mining Committee.

The businesses will start investing initially. But for their requirements in the long term, experts expect joint ventures with global extracting, processing, and manufacturing companies for now.

Attero, a battery recycling company, aims to utilise India’s entry into the Minerals Security Partnership to tie up with international players. This will help it leverage expertise, technology transfer, and best practices in critical minerals.

“As the EV (electric vehicle) industry continues to grow, it becomes imperative for India to be self-sufficient in these critical minerals.

This investment influx will support the development of a robust supply chain for critical minerals and contribute to the growth of related industries,” said Nitin Gupta, chief executive officer (CEO) & co-founder, Attero Recycling.

The trigger

The government’s push to build a global supply chain came after the country’s manufacturing sector faced a shortage of semiconductors and other essential components. These were required for the electronics and auto industry during Covid-19.

During the first wave in early 2020, automakers slowed down their orders for semiconductors as vehicle sales were down.

The shortage of orders resulted in suspension of semiconductor production at plants. So, production in Taiwan, China, Singapore and other chip-producer countries saw massive cuts in production.

But when demand recovered faster than anticipated in 2021, the Chinese companies started stockpiling because of their ongoing concerns with US foreign policy and relations. For Indian firms, the waiting time for semiconductors went up to a year.

The situation worsened again when the Russia-Ukraine war started in early 2022. This is because both the countries export raw materials like rare gas neon, chemical C4F6 (Hexafluorobutadine), and metals such as palladium, nickel, platinum, rhodium, and titanium. These are critical for semiconductor manufacturing.

If a country controls minerals needed by India’s manufacturing sector, it can further constrain the supply. This, in turn, can aggravate the situation of goods shortage in India, experts said.

However, industry stakeholders feel that the impact of a critical minerals’ list will depend on several factors.

These include the specific minerals included, the country's resource endowment, its industrial capabilities, and the policy measures implemented to support the development of the sector.

Challenge

Though the government is looking forward to cashing in on India’s newly-found place in the Minerals Security Partnership, industry players feel that the country is at a disadvantage.

This is because the recent achievements only give an advantage to a scaled-up technology, which India still does not possess.

Moreover, to source these critical minerals, India also needs to partner with the respective mineral-rich country.

“Today, the focus for the automotive sector is on critical and rare earth elements but manufacturers are at the research and development stage. This would result in short-term delays,” said Rahul Lamba, CEO, The Energy Company, a deep-tech start-up in the electric vehicles space.

A total of 17 minerals from the 30 critical minerals identified in the ‘Critical Minerals for India’ report are critical on both the criticality index — supply risk and economic importance. A total of 10 are 100 per cent import dependent and three minerals have an import dependency of above 50 per cent.

Experts feel that India should also work closely with countries having trade agreements for the transfer of technology and mineral trading. “The need of the hour is to actively engage in already existing partnerships or trade agreements to bring them to fruition,” said one of the experts.

In April, in a first-of-its-kind partnership, the Indian and Australian governments had decided to jointly invest $3 million each for five critical mineral exploration projects in Australia.

In mid-2020, India, through Khanij Bidesh India Ltd (KABIL), also signed an agreement with an Argentinian firm to jointly explore lithium. Besides, it is also exploring options in Chile and Bolivia.