Critical mineral strategy

Source-This post on Critical mineral strategy has been created based on the article “Critical mineral strategy: Boost for EV sector but experts flag policy gaps” published in “Business Standard” on 25 July 2024.

UPSC Syllabus-GS Paper-3– Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

Context– The Ministry of Mines has auctioned more than 50 critical mineral blocks across four rounds. But there has been limited participation from mining firms due to the absence of a processing and refining industry.

The Indian government has taken significant steps in the recent Budget to position India as a key manufacturing hub for advanced technologies, particularly in the electric vehicle (EV) and energy storage sectors.

Critical minerals like lithium, chromium, nickel etc. and rare earth elements are important for industries such as electronics, electric vehicles (EVs), renewable energy, defense, and high-tech telecommunications. The increasing sales of EVs are driving higher demand for batteries, which has been steadily rising in recent years.

What are the Key Budget Announcements?

1) Customs Duty Removal- Customs duties on 25 critical minerals, such as lithium, nickel, copper, and cobalt, have been removed to enhance domestic manufacturing of advanced technologies like electric vehicles (EVs) and energy storage systems.

Read More- Lithium Reserves in India

2) Concessional Customs Duty Extension -The concessional customs duty of 5% on lithium-ion cells has been extended until March 2026.

3) Critical Mineral Mission (CMM)-This has been launched to promote domestic production and recycling of critical minerals.

What has been the reaction and expectations of Indian Industry?

1) Long-term Benefits- Industry executives view these measures as positive for the ‘Make in India’ initiative. Benefits will materialize in the long term.

2) Short-term Concerns– There are no additional incentives to support the EV ecosystem and encourage its greater adoption.

3) Impact on Vehicle Costs: -In the short term, removing duties on raw materials alone won’t help the sector because it still imports cells.

4) Policy Inconsistency: – There was absence of FAME-III policy and special EV incentives in the Budget. As per experts, there should have been continuity of FAME policy to realize the government’s vision for the electric vehicle sector.

5) Need for Domestic Processing: There is a necessity of developing domestic critical mineral processing and refining capabilities under CMM.

Question for practice

What are the main budgetary announcements? What are the reaction and expectations of the Indian industry?