Mine over matter: Critical mineral policy must address industry needs

The government has offered manufacturers of electric vehicles (EVs), mobile phones, solar panels, and other renewable-energy equipment significant incentives and subsidies. Critical to the operations of such manufacturers is an uninterrupted and robust supply chain of critical minerals that power these industries — lithium, nickel, cobalt, tungsten and graphite, cadmium, chromium, and so on. Building domestic sources of these minerals, then, is essential not only to ensure that climate-change goals are met but that India can build a degree of security and competitive advantage in manufacturing these products of the future. Set against these objectives, which involve spending substantial amounts of taxpayer money, the government’s policy to maximise critical-mineral mining and production has fallen short.

In June last year, the Ministry of Mines announced a list of 29 critical minerals open for private-sector mining. In the multiple rounds of auction that have been held so far for 38 mineral blocks, only 14, or 37 per cent, have found bidders, leading to several cancelled auctions. Seven of the blocks that received a limited first-round interest were re-auctioned this year. Initial bidders did not rebid and, in the end, only four blocks received bids. The response has been tepid even after the government introduced a programme to partly reimburse exploration expenses for licence holders up to 50 per cent, capped at Rs 20 crore. Vedanta, Coal India, and the Dalmia group were among the big names that have successfully bid for blocks. The rest went to small, mostly unknown and some unlisted companies with no experience in mining. Given the long gestation period of 16-odd years for developing a mine and the heavy investment involved, there could be legitimate doubts about the capacity of such small firms to appropriately exploit these acquisitions, raising concern that these bids may simply be long-term real estate plays. This outcome is a long way from the Centre’s hopes of attracting interest from junior mining companies, or companies that focus on early-stage exploration and mining development, and global majors. Behind this distinctly tepid response is the government’s inadequate groundwork. Typically, critical-mineral blocks are put up for mining leases (MLs), involving some level of exploration data, or composite leases (CLs), which include prospecting and mining. Of the 38 blocks, only five were designated for MLs and 33 for CLs. Crucially, none of the blocks had been subjected to detailed exploration and only six had completed a general exploration. The ministry has acknowledged this deficiency and has committed itself to a “thorough exploration” before announcing another round of auction. Though this learning process certainly indicates progress, the government may have to take a further step to attract serious bids. Most of these steps involve insulation from the usual exigencies of doing business in India. For instance, winning bidders need to obtain up to 23 approvals and clearances before they get started — from environmental approvals to state sanctions. In this respect, the government could draw on its own plug-and-play playbook for inviting investment along the dedicated freight corridors, where it is offering investors land that has already been acquired and received all the requisite clearances. Creating a responsive enabling environment for the critical mineral mining industry is the key to ensuring that this vital business does not go the way of previous governments’ oil exploration policy.