Securing critical minerals: India's new mission for future growth

The Union Cabinet on Wednesday approved the National Critical Mineral Mission, which would involve an expenditure of Rs 16,300 crore by the government as well as investment of Rs 18,000 crore from public-sector units and other sources. This is a major new direction in Indian policy, and is a response to growing concerns about the resilience and security of the supply chains vital to 21st century growth. Multiple minerals such as lithium and molybdenum are vital for the production of intermediate goods from batteries to semiconductors. It has become increasingly clear in recent years that growth in multiple sectors — from energy to automobiles — depends on the availability of such intermediate goods and thus on a secure, affordable, and reliable supply of critical minerals. The scarcity of semiconductors, for example, led to production deficits in the Indian automobile sector during the pandemic. The fact that the government has taken on the responsibility of securing these supply chains is excellent news.

 

There is, of course, an important national-security element to this effort. Globally, the extraction and processing of critical minerals are dominated by China. Chinese companies, many of them connected closely to the state, are dominant players in locations where critical minerals are mined and worked. They include African countries and Indonesia. At a time when concerns about the weaponisation of supply chains and trade are very much on policymakers’ minds, it is considered important for every country to define its own list of critical minerals and devise a strategy for securing their supply chains. While India has its own reserves of critical minerals, these have not been properly explored and their exploitation is still some time away. In addition, what is known of these reserves can put off many possible investors in the sectors domestically. Some of them are in politically sensitive areas, and others are in biodiversity hotspots. Such problems can be overcome with technology and political will. But there is no doubt that it will take time and policy support to develop India’s domestic resources. It is no coincidence that recent auctions for exploration licences in India were not met with great interest by the private sector.

 

Investment in overseas resources thus takes on additional importance. The government has already set up a new public-sector enterprise, which it calls Khanij Bidesh India Ltd, or KABIL, and it is meant to do some of this work. So far KABIL has focused on lithium and cobalt, and is investigating partnerships with Argentina and Australia. But there is a lot more that could be done, and hopefully the new mission will provide catalytic finance not only for KABIL’s efforts but also for new interest in this domain from the Indian private sector. In the end, the private sector’s actions will be crucial. There are certainly profits to be made in the coming decades. The International Energy Agency has predicted that the prices of some critical minerals will increase between 20 and 50 times by 2050. In the past, when new minerals — from coal to petroleum — became vital for industrial and energy supply chains, large companies stepped up to manage and underwrite their supply, becoming large and profitable enterprises in the process. This is bound to happen again with 21st century critical minerals. For the sake of India’s growth and energy security, some of those companies should be Indian. The effectiveness of the new mission will be judged by how enthusiastically Indian companies engage with its efforts.