Understanding India's Focus on Critical Minerals in 2023

Why India is Focusing on Critical Minerals

India is prioritizing critical minerals due to their essential role in high-tech industries, renewable energy, defence, and overall economic security. These minerals are crucial for the production of batteries, electronics, and advanced machinery. Currently, India is entirely reliant on imports for most of these minerals, which makes its supply chains highly vulnerable to global disruptions.

Identified Critical Minerals

India has classified 30 minerals as critical, including:

• Lithium
• Cobalt
• Nickel
• Graphite
• Rare Earth Elements (REEs) such as neodymium, dysprosium, terbium, and yttrium
• Copper
• Tin
• Tungsten
• Titanium
• Vanadium
• Niobium
• Tantalum
• Germanium
• Indium
• Selenium
• Tellurium
• Zirconium
• Molybdenum
• Beryllium
• Chromium
• Fluorspar
• Potash
• Phosphate
• Phosphorite
• Platinum group of elements
• Rhenium
• Hafnium
• Bismuth

These minerals are vital for clean energy technologies, defence production, and electronics manufacturing.

Current Situation in India

India is nearly 100% import-dependent for critical minerals. The import of copper, a crucial component for high-tech manufacturing, has surged tenfold over the last decade. This heavy reliance exposes India to price fluctuations, trade barriers, and supply disruptions, especially as global demand for these minerals rises.

Challenges for Investors

Investors encounter several challenges in India's critical minerals sector:

• Low recovery rates for these minerals.
• High investments required for exploration, refining, and processing.
• Lack of comprehensive geological data.
• Regulatory and environmental clearances that can delay projects.
• Geopolitical and local risks associated with overseas sourcing, particularly in Africa and Latin America.

Exploration and Classification of Minerals

India employs the United Nations Framework for Classification of Resources (UNFC) for mineral exploration:

• G4 (Reconnaissance): Preliminary exploration.
• G3 (Prospecting): Initial resource assessment.
• G2 (General Exploration): Confirming resource viability.
• G1 (Detailed Exploration): High-confidence resource data.

Currently, only 10% of India's mineral blocks are classified at the G2 level or higher, indicating a need for further exploration.

Government Initiatives to Boost the Sector

The Indian government is taking several initiatives to enhance its critical minerals sector:

• Geological Exploration: The Geological Survey of India (GSI) has initiated 368 projects since FY23, with ongoing and planned projects.
• National Critical Minerals Mission (NCMM): Aiming to enhance mineral security and adopt new technologies.
• Policy Reforms: Streamlining regulatory processes and proposing incentives such as tax holidays.
• International Partnerships: Collaborating with mineral-rich nations to secure stable supplies.
• Support for Domestic Processing: Encouraging local processing to reduce reliance on imported refined products.
• Private Investment Encouragement: Allocating high-confidence mineral blocks for exploration.
• Government Engagements: Negotiating stable supply chains to mitigate geopolitical risks.

Challenges Faced by the Government

Despite efforts, the government faces significant challenges:

• Limited data for high-confidence resource estimates hampers investment.
• Long gestation periods for mineral projects, such as lithium, can take up to 16 years from discovery to production.
• Geopolitical and social risks in overseas sourcing, especially in Africa.
• Slow progress in incentivizing domestic processing and refining industries.
• Need for more robust policy frameworks to attract long-term investments.

Frequently Asked Questions (FAQs)

Q1. Why is India focusing on critical minerals?
Answer: India prioritizes critical minerals for their importance in high-tech industries and renewable energy, aiming to reduce import dependency and enhance economic security.

Q2. What are the key minerals identified by India as critical?
Answer: India identifies 30 minerals as critical, including lithium, cobalt, nickel, and rare earth elements, essential for technologies in clean energy and defence.

Q3. What challenges do investors face in India's critical minerals sector?
Answer: Investors encounter low recovery rates, high exploration costs, lack of geological data, and regulatory hurdles, complicating investment in the sector.

Q4. How does India classify its mineral resources?
Answer: India utilizes the UNFC framework, categorizing resources from preliminary exploration (G4) to detailed exploration (G1) to assess their viability.