Critical Minerals in India and Mines and Minerals (Development & Regulation) Amendment Bill, 2023 : Explained, pointwise

Introduction

Critical minerals, in India and around the world, form the bedrock of contemporary technology. They are integral to the creation of products like solar panels, semiconductors, wind turbines, and advanced batteries used for storage and transportation. In essence, the shift towards renewable energy is impossible without these critical minerals. This is why securing their supply chain has become a top priority for leading economies.

Therefore, to create a sustainable supply chain of critical minerals, government has moved amendments to Mines and Minerals (Development and Regulation) Act, 1957, by Mines and Minerals (Development & Regulation) Amendment Bill, 2023. Let’s have a discussion on the availability of critical minerals in India and how the new bill will be helpful in maintaining the supply chain.

What are critical Minerals?

Each country has its own classification of critical minerals depending on levels of economic development, industry requirements, national interests and security concerns, technology, market changes and natural resource endowment. For most of the countries, the criticality is judged by two main parameters, economic importance and supply risk. In Indian context also, the same two parameters were taken into consideration.

As per the definition in the report by Ministry of Mines,

Critical minerals are those minerals which are essential for economic development and national security, the lack of availability of these minerals or even concentration of existence, extraction or processing of these minerals in few geographical locations may lead to supply chain vulnerability and disruption.

The seven-member Committee constituted by Ministry of Mines has identified a set of 30 critical minerals for India. These are Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium, Germanium, Graphite, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, PGE, Phosphorous, Potash, REE, Rhenium, Silicon, Strontium, Tantalum, Tellurium, Tin, Titanium, Tungsten, Vanadium, Zirconium, Selenium and Cadmium.

Present status of critical minerals in India

For the majority of the critical minerals, India is dependent upon other countries. For some of the critical minerals, India is 100% import dependent, as shown in the table below:

What are the Challenges of critical minerals supply?

Concentration of minerals: The extraction or processing of critical minerals is concentrated in a few geographical locations, leading to import dependency and potential supply chain disruptions. For example, China owns most of the cobalt mines in the Democratic Republic of Congo, which produces 70% of the world’s cobalt. China also has the largest reserves of Rare Earth Elements (REEs), followed by Vietnam, Brazil, and Russia.

As presented in the table above, India is 100% import-dependent on countries including China, Russia, Australia, South Africa, and the U.S. for the supply of major critical minerals.

High Cost: Deep-seated minerals such as gold, silver, copper, zinc, lead, nickel, cobalt, platinum group elements (PGEs), and diamonds are harder and more costly to explore and mine compared to surface or bulk minerals. It forces India to import these minerals.

Global trade tensions, as seen in the case of US and China trade wars, have proved to be detrimental for the interest of India. It led to slow down of the global economy. In these tensions, industries face policy uncertainty, which discourage their expansion and is detrimental for their economic interest.

The pandemic caused disruptions in the supply chain, affecting global trade and the supply of critical minerals to dependent nations like India. It also led to a temporary shortage of semiconductors.

The Russia-Ukraine war highlighted the vulnerability of global supply chains, demonstrating that no country should be entirely dependent on another for essential items. Russia is a significant producer of nickel, palladium, titanium sponge metal, and the rare earth element scandium, while Ukraine is a major producer of titanium.

Developing countries at loss: While the developed countries get out of crisis, it is the developing countries that suffer most from any global incidence. For instance, after Russia – Ukraine war, China and Russia became strategic partners, developed countries have created Minerals Security Partnership (MSP) and G7’s Sustainable Critical Minerals Alliance. Developing countries will have to choose among them.

What is the Need of Critical Minerals?

They are essential for the transition to a clean energy economy. Critical minerals are used in a variety of clean energy technologies, such as electric vehicles, wind turbines, and solar panels. As the world transitions to a clean energy economy, demand for critical minerals is expected to grow significantly.

They are used in a variety of other products. Critical minerals are also used in a variety of other products, such as electronics, semiconductors, and medical devices. This means that a disruption in the supply of critical minerals could have a significant impact on a wide range of industries.

Critical Minerals are also used in smart electronics; defence and aerospace equipment; telecommunication technologies and so on.

What is the need of the Mines and Minerals Amendment Bill, 2023?

India has explored just 10% of its Obvious Geological Potential (OGP), less than 2% of which is mined, and the country spends less than 1% of the global mineral exploration budget. Most exploration projects have been carried out by the government agency Geological Survey of India and other Public Sector Undertakings (PSUs).

India’s mining policy had kept private-sector explorers away from greenfield exploration of minerals for some years. It means they could only get licenses to further prospect and mine resources that had been explored by a government entity.

Union Minister of Mines Pralhad Joshi noted that while Indian PSUs were doing good at exploring surface and bulk minerals like coal and iron ore, they had not done well with deep-seated and critical minerals. It was due to the high cost and long duration of risky projects, along with the pressure to increase the supply of bulk minerals.

In Australia and other jurisdictions globally, private mining firms take risks to find potential mines. They are called known as junior explorers. Once mines are found, they can sell these to bigger mining companies, who then develop and run these mines.

How Mines and Minerals Amendment Bill, 2023 aims to tackle the challenges of Critical Mineral supply in India?

The bill allows private sector investment in the exploration of critical and deep-seated minerals in the country.

Firstly, the Bill excludes at least six previously mentioned atomic minerals from a list of 12 which cannot be commercially mined. Being on the atomic minerals list, the exploration and mining of these six — lithium, beryllium, niobium, titanium, tantalum and zirconium, was previously reserved for government entities.

Secondly, The Bill introduces a novel license category aimed at fostering exploration by private sector players at the reconnaissance and prospective stages.  

It is termed an exploration license. This license will be awarded by State governments through competitive bidding. It will span for five years initially with the potential for a two-year extension.  

In these bidding rounds, qualified explorers will bid for a desired percentage of the auction premium. This premium will eventually be paid by a mining lease holder upon successfully exploiting a mine unearthed through State government-led exploration.  

Third, Allowing retention of part of the exploration area: It also specifies the maximum area for exploration; activities in up to 1,000 sq km will be allowed under a single exploration license. It also states that the licencee will be allowed to retain up to 25% of the originally authorized area after the first three years after submitting a report to the State government stating reasons for retention of the area.  The MMRD Act currently requires exploration licencees to relinquish the entire exploration area after three years, unless they are granted a mining lease.

Fourth, state government will grant the exploration licence through competitive bidding. While the central government will frame rules for exploration licensing.

Fifth, the exploration licence will be issued for five years. A licencee may request for extension of up to two years.

Sixth, Auctioning of mining leases for critical and strategic minerals: The MMRD Act currently allows the state governments to auction mining leases for all minerals. The MMRD Amendment Bill gives the central government the power to auction mining leases for specified critical and strategic minerals, such as gold, silver, copper, zinc, lead, nickel, and cobalt.

What are the challenges with the bill?

Gestation period: The main way a private company with an exploration license can earn revenue is through a share of the premium paid by the miner. This only happens after a successfully discovered mine is auctioned and operational. This process could take years due to government clearance timelines. For example, Ghorabhurani-Sagasahi Iron Ore Mine, a greenfield captive mine, was auctioned in 2016. Despite being a bulk mineral, production only started in late 2021, nearly six years later, due to the time taken to receive necessary clearances.

Uncertain payment: The explorer won’t know how much revenue they’ll receive as the auction premium will only be known when a mine is successfully auctioned.

In a 2012 ruling, the Supreme Court observed that large capital investments go into discovering natural resources through exploration and mining contracts. Companies would only want to spend large amounts if they’re assured of utilizing any discovered resources. In the new bill, only the government can auction what an explorer has discovered. This is unlike other global jurisdictions, where private explorers can sell their discoveries to miners, themselves.

Conclusion

Private players always get motivated by the profit they are going to make. If government want them to participate in the exploration of critical minerals in India, it needs to provide them certainty of the revenue stream from that investment, then only, india’s efforts towards self-sufficiency will be successful.

Source: The Hindu , PIB