The problem of rare earth magnet supplies is an indicator of how India’s EV and clean power ambitions are hostage to imports — mostly from China. It’s not just rare earth magnets; India is heavily dependent on imports for its entire requirement of rare earth elements (REEs) — a group of 17 minerals classified as lanthanides in the periodic table. REEs are critical in several areas — the green energy transition, electronics, including defence electronics, and a few others. While only minuscule amounts of these are required, they are nonetheless essential inputs.
Apart from rare earths, India is also vulnerable to supply shocks in other critical minerals required for the clean energy transition, such as lithium, cobalt, graphite, and nickel. It has become hard to ignore India’s inability to ring-fence its critical metal and minerals supply chain, despite having considerable reserves of many of the minerals that it imports. The Union and state governments have been quite slow and bureaucratic in mineral exploration and mining over the decades. Worse, they have completely neglected the processing of critical minerals — which means India will remain hostage to imports unless we start moving at a war footing now.
There have been some announcements recently by the authorities to accelerate exploration and mining of minerals, including rare earths. But these are incremental steps, and a complete rethinking in this area is needed. In processing many minerals — including lithium, rare earths, graphite, and cobalt — India needs to build from scratch.
China’s domination in global lithium, REEs, cobalt, nickel, and graphite has been growing over the years. Most countries — including the United States, the United Kingdom, the European Union, and India — have long been aware of their vulnerabilities to supply shocks from China. Yet, they are only belatedly acting now to reduce dependence on China, and this will take several years.
India actually has plenty of reserves of some critical minerals that it imports — such as cobalt and REEs. In cobalt, India is estimated to have the fourth- or fifth-largest reserves in the world. Of late, because of the interest in REEs, there have been discoveries of various of these elements in different parts of the country. For other minerals such as lithium, while India does not have vast known reserves, neither does China. Australia and the Lithium Triangle countries — Argentina, Bolivia, and Chile — have large reserves of lithium, as does the US. But China dominates because it has built the largest processing capacities for both lithium and cobalt. While the Democratic Republic of Congo has the biggest known reserves of cobalt, China has established an enviable supply chain by taking control of major mines there and building a large processing capacity for refining cobalt within its own borders. In REEs and graphite, China leads in both mining and processing.
India has paid too little attention to critical mineral exploration and mining over the decades, leaving the responsibility for discovery and extraction largely to a few public sector firms. While the country started allowing private sector entry through auctions, these have not been a major success. Global private players seek profits for the significant risks they take in exploring and mining, and so far India’s auction designs and policies do not seem to attract them.
Equally importantly, we have not paid any attention to the processing sector. But this will be crucial to reducing import dependence. We need properly designed production-linked incentives (PLIs) for this purpose. The fact that processing is a dirty industry that adds to a country’s emissions and overall pollution is known — but these can be addressed with proper policies to mitigate the pollution impact.
Also, it is not just lithium, cobalt or REEs — natural hydrogen reserves and thorium (with its potential for nuclear energy) should be among the priority exploration and mining concerns. These will shape energy production capacities over the next few decades. With the first thorium power plant being showcased by China and the US also researching thorium-based nuclear power, this mineral will be critical in the future, and India has good thorium reserves. Natural hydrogen will be far cheaper than any green hydrogen project. Without ensuring self-reliance in these, India will forever remain captive to the whims and fancies of China and others who build processing and mining capacities in these areas. This is a vulnerability that a country expected to be the third-largest economy by 2030 cannot afford.
The author is former editor of Business Today and Businessworld, and founder of Prosaic View, an editorial consultancy
 "Ahead of the first offshore mineral auctions, the central government has introduced royalty rates for construction sand, polymetallic nodules, and overburden or waste—key minerals to be extracted through offshore mining. The royalty rate for dolomite")
