Unlocking India’s Critical Minerals Potential

Source: This post on Unlocking India’s Critical Minerals Potential has been created based on article “The oligarchy we see today” published in The Hindu on 23^rd January 2025.

UPSC Syllabus topic: GS Paper 1- Distribution of Key Natural Resources across the world

Context: The article discusses China’s strategic use of export controls on critical minerals, which are essential for advanced technologies like semiconductors, aerospace, and batteries. It highlights China’s calculated approach to controlling mineral exports, balancing its economic interests with geopolitical goals. In contrast, the article examines India’s challenges in building a robust critical minerals ecosystem despite having significant mineral potential, as evidenced by lithium deposits in Jammu and Kashmir.

What recent export restrictions has China introduced?

1. On January 2, 2025, China’s Ministry of Commerce (MOFCOM) added 28 U.S. entities to its export control list.
2. The restrictions target minerals critical for high-tech applications, including tungsten, gallium, magnesium, beryllium, hafnium, and lithium-6.

How has China historically used its mineral exports as a strategic tool?

1. China has repeatedly weaponized critical mineral exports, targeting minerals essential to Western nations, especially for semiconductors, batteries, and advanced electronics.
2. Examples include:
   1. The rare earth minerals embargo against Japan (2010).
   2. Restrictions on antimony, gallium, and germanium exports.
   3. A ban on rare earth extraction and processing technologies (2023).
3. China avoids controlling minerals heavily reliant on Western raw material imports.
4. It refrains from measures that could harm domestic industries or export-driven sectors.

 What is India’s current status in critical minerals development?

1. India discovered lithium deposits in Jammu and Kashmir’s Reasi district in 2023, but no company has shown interest in bidding for the resources.
2. Only 48% of the mineral blocks offered for auction have been successfully auctioned.

What steps has the Indian government taken to boost critical minerals development?

1. Identified 30 critical minerals essential for national security.
2. Established Khanij Bidesh India Ltd. (KABIL) to secure overseas investments in critical minerals like lithium and cobalt.
3. Passed the Mines and Minerals (Development and Regulation) Amendment Act, 2023, removing restrictions on certain rare earth elements.

How has the 2023 amendment aimed to improve exploration?

1. Introduced an ‘exploration license’ to attract specialized exploration firms, including foreign players.
2. Enabled firms to focus on reconnaissance and prospecting without committing to full-scale mining.
3. Promised reimbursement of 50% of exploration expenditure once mining begins.

Why have these reforms not yielded significant results?

1. Only a few exploration licenses for minerals like lithium and rare earth elements have been issued, mostly to public sector firms.
2. Foreign participation remains minimal, and mining license auctions have stalled.
3. Outdated resource classification systems and insufficient geological data make exploration riskier for potential bidders.

 How can India improve its critical minerals exploration?

1. Focus on high-quality geological surveys to reduce information asymmetry between the government and mining companies.
2. Offer larger upfront fiscal incentives during the exploration phase instead of reimbursing costs only after production begins.
3. Both sectors involve high upfront costs and long timelines for profitability.
4. India’s aggressive capital support for semiconductor fabrication could be replicated for critical minerals exploration to offset early costs and attract investment.

What should India’s approach be?

1. India must address systemic issues, including outdated exploration methods and limited fiscal incentives, to unlock the potential of its critical minerals sector.
2. Adopting a semiconductor fabrication-style model for critical minerals could boost domestic exploration, mining, and exports, aligning with the country’s strategic goals.