Money for mining the seas: India considers political and financial risks

Legislative reform could create the environment for investments at a scale the government can hardly provide

When Union Mines Secretary Vivek Bharadwaj said at a recent event that the government plans a new offshore law, industry leaders thought the private sector would get to mine in the deep seas in partnership with foreign companies.

Indian mining will have to up its game for such work. India holds 11 per cent of the world's proved deposits of titanium dioxide but it imports $1 billion of the “new age" mineral annually. Titanium has widespread use—from the defence industry to airlines—because it is lightweight and durable.

Bharadwaj blamed “technological inefficiencies, and litigation” for such failures. Stakes are high as most of these new age minerals go into the green energy sector and so are heavily linked to India’s net zero ambitions. (see chart)

An enduring constraint is that of the Offshore Areas Mineral (Development and Regulations) Act, 2002. The law bars any one except the government entities to mine for minerals in deep seas. Foreign investment is ruled out and the Act also provides for “stringent punishment of five years” for violators. As there is no regulatory authority, the discretion is solely with the government to decide which activity is legitimate. (Oil and gas drilling does not come under the Act.)

The onshore equivalent, the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR), was revised in 2021, but as a huge stash of critical minerals is not expected to be found inland the search has to be on the sea beds.

The Offshore Act was in the making for 20 years—according to a parliamentary debate in 2003—and it was framed in response to reports that were mining nodules in India’s coasts. This legal architecture is now up for change in a hugely changed economic scenario. Some criticism is certain but it is unlikely that any political party in Parliament shall argue the government is moving away from a “socialist bill”, as the Lok Sabha debated had argued in 2003.

”I think the government, which is very decisive, very proactive, is in the process of amending the Offshore Areas Act that was put in the public domain for consultations. The consultations are now over, and it will be shortly debated by the Parliament," said Bharadwaj at the industry function.

Challenges to mine

The more substantial problems are elsewhere. Not every new age mineral is in the middle of a demand boom. Lanthanum and Cerium sit inside the catalytic converters of all cars running on Indian roads and are heavily mined. Yet as the demand moves towards electric vehicles, which do not need catalytic converters, supplies of the two metals have stockpiled with the producers.

A recent report commissioned by Ficci mapped the global availability of new age energy minerals, India’s prospects, and expected price trends for this decade, and business challenges in promoting them.

As global mining companies move away from fossil fuels to the new age minerals, the pace of technological change makes it difficult to bet on a winner.

It also makes it difficult for the India government to move itself away from the role of a promoter of this business. The role involves ramping up money on research and development and prospecting for new minerals. Amendments to the offshore mining act will, as of now, give state-owned companies prospecting rights without auctions while others, including joint ventures, are asked to take a proposed auction route.

“India can be better prepared for the next stage of green technology utilisation by laying the groundwork for exploring and mining. The country has resources of nickel, cobalt, molybdenum, and heavy rare earth elements, but further exploration would be needed to evaluate the quantities of their reserves," said Rajesh Chaddha, senior fellow at Centre for Social and Economic Progress (CSEP) who has researched the sector.

For securing mineral resources, India will however need to go abroad for tie ups—a task that requires diplomatic tightrope walking. The centrral government has set up Khanij Bidesh Ltd (KABIL) in August 2019 as a joint venture between three state-owned mineral companies, National Aluminium Company (Nalco), Hindustan Copper Ltd (HCL) and Mineral Exploration Company Ltd (MECL). After Ongc Videsh and Coal Videsh, it was the third time in the past two decades that the Indian government promoted joint ventures to scout for minerals overseas. KABIL has an authorised capital of Rs 100 crore, a puny amount made smaller considering that the promoter companies have not paid up their dues.

“There are some minerals where India has no known resources, such as lithium and indium, and here the country must focus on securing supply chains for these minerals and acquiring foreign mineral assets to ensure their continuous supply,” said Chaddha, a point which the Ficci report elaborates on. This also means opening up the field to private players, added Chaddha.