India’s 2024 Budget has made a strategic move by exempting customs duties on critical minerals like lithium, aiming to boost electric mobility and sustainable energy. This initiative highlights India’s efforts to reduce import dependency, support domestic production, and enhance its commitment to environmental goals and energy security.
Origin of the Article
This editorial is based on “A push for critical minerals” which was published in The Financial Express on 27/07/2024. The article discusses India’s strategic move in Budget 2024 to exempt customs duties on critical minerals like lithium.
Relevance for UPSC Students
Understanding India’s strategy on critical minerals is crucial for UPSC aspirants. It relates to multiple GS papers, including topics on government policies, economic development, and energy security. This knowledge can aid in answering questions on India’s energy policies, sustainability efforts, and economic strategies.
Why in News
The topic of critical minerals is prominently in the news due to the Union Budget 2024-25, which proposes customs duty exemptions on minerals like lithium. This move is crucial for UPSC aspirants as it ties into India’s efforts to boost electric mobility, reduce import dependency, and secure energy resources. The topic’s relevance is underscored by its connection to previously asked UPSC questions on mineral management and economic development, making it a significant area of study for both Prelims and Mains.
What are Critical Minerals?
Critical minerals are essential for economic development and national security. Their availability is crucial as a lack of these minerals or their concentration in specific geographical areas can lead to supply chain vulnerabilities and disruptions. These minerals are indispensable for various modern technologies and are key components in clean energy, electronics, defense, and healthcare sectors.
Key Characteristics of Critical Minerals
- Essential for Modern Technology: Critical minerals are vital for technologies such as solar panels, wind turbines, and electric vehicles. They are also used in electronics, defense, and healthcare.
- Geopolitical Significance: The supply of critical minerals is often concentrated in a few countries, making them susceptible to supply chain disruptions and price fluctuations, thereby affecting global economic stability.
- Environmental Impact: The extraction and processing of these minerals can have significant environmental consequences, including habitat destruction and pollution, if not managed responsibly.
Strategic and Critical Minerals for India
India is focusing on identifying and strategizing the use of critical minerals essential for its technological and renewable energy sectors. This initiative aims to reduce dependence on imports and bolster domestic production capabilities.
Identification
The Ministry of Mines has identified 30 critical minerals crucial for India’s technological and renewable energy sectors. This identification process involves international studies, inter-ministerial consultations, and empirical analysis to ensure comprehensive understanding and strategy formulation.
Committee’s Role
A dedicated committee has been formed to assess and determine these minerals. The committee recommends establishing a Centre of Excellence for Critical Minerals to periodically update the critical minerals list and develop effective value chains for their utilization.
List of Minerals
The identified critical minerals for India:
- Antimony
- Beryllium
- Bismuth
- Cobalt
- Copper
- Gallium
- Germanium
- Graphite
- Hafnium
- Indium
- Lithium
- Molybdenum
- Niobium
- Nickel
- Platinum Group Elements (PGE)
- Phosphorous
- Potash
- Rare Earth Elements (REE)
- Rhenium
- Silicon
- Strontium
- Tantalum
- Tellurium
- Tin
- Titanium
- Tungsten
- Vanadium
- Zirconium
- Selenium
- Cadmium
PESTEL Analysis
| Political: India’s exemption of customs duties on critical minerals aligns with broader governmental objectives to enhance national security and economic independence. This strategic move mitigates geopolitical risks associated with heavy import reliance, particularly from dominant players like China. Economic: Secure access to critical minerals is essential for India’s burgeoning sectors, including electric mobility and renewable energy. The exemption from customs duties could lower costs for manufacturers and spur domestic industries, though the country still faces challenges such as price volatility and insufficient domestic processing capabilities. Social: The push towards sustainable and technologically advanced sectors, driven by the critical minerals initiative, may influence societal values towards greener technologies. This shift could enhance public support for environmental sustainability and innovation. Technological: The focus on minerals crucial for high-tech applications positions India at the forefront of global tech advancements. However, the lack of domestic processing facilities and advanced extraction technologies remains a significant barrier that needs addressing through R&D investments and infrastructure improvements. Environmental: Mining and processing of critical minerals pose significant environmental risks. Sustainable practices and regulatory frameworks need to be strengthened to mitigate ecological damage and promote responsible extraction and processing. Legal: The implementation of policies to reduce import dependencies and develop local industries will require robust legal frameworks. This includes regulations on mining practices, environmental protection, and trade agreements, ensuring they support the strategic objectives without conflicting with international obligations. |
Why are these Minerals Considered Critical?
Critical minerals are integral to various sectors and initiatives in India, including energy transition, space exploration, renewable energy infrastructure, digital economy, and semiconductor production. Their secure supply is essential for technological advancement and national security.
Energy Transition and Electric Mobility
Lithium and other critical minerals are pivotal for India’s transition to clean energy and electric mobility. The country’s lithium imports surged from Rs 13,673.15 crore in FY2022 to Rs 23,171 crore in FY2023, underlining the growing demand. The customs duty exemption on critical minerals in Budget 2024 aims to reduce production costs and accelerate EV adoption.
Space Exploration and Satellite Technology
Critical minerals are essential for India’s space missions, including the Gaganyaan project. ISRO relies on rare earth elements and other minerals for high-performance magnets, specialized alloys, and advanced electronics used in satellites and spacecraft.
Renewable Energy Infrastructure
Critical minerals like indium, gallium, and tellurium are vital for solar PV technology, while rare earth elements are essential for wind turbines. Securing these resources is crucial for achieving India’s renewable energy targets, including 500 GW of capacity by 2030, and for ensuring energy security.
Digital Economy and Telecommunications
India’s digital economy, expected to reach $1 trillion by 2025, heavily depends on critical minerals for electronics and telecommunications infrastructure. Initiatives like Digital India and the rollout of 5G networks require minerals such as gallium, indium, and tantalum.
The Silicon Heart Dependent on Critical Minerals
Semiconductors, fundamental to modern electronics, rely on critical minerals like silicon, germanium, and gallium. India’s Semiconductor Mission aims to boost domestic semiconductor manufacturing, emphasizing the importance of these minerals for technological self-reliance.
Critical Mineral in Geology
Securing critical minerals enhances India’s geopolitical standing. Participation in global initiatives like the Minerals Security Partnership and bilateral agreements, such as the India-Australia Critical Minerals Investment Partnership, demonstrates India’s proactive approach to securing supply chains and global mineral diplomacy.
What are the Major Challenges Related to Critical Minerals for India?
India faces several challenges in securing and utilizing critical minerals, including import dependency, exploration difficulties, value chain gaps, environmental concerns, and price volatility.
India’s Import Dependency
India’s heavy reliance on imports for critical minerals poses economic and strategic risks. China’s dominance in processing these minerals significantly impacts India’s supply chain security, making it vulnerable to disruptions and price volatility.
The Exploration Conundrum
India’s domestic exploration for critical minerals is still in its early stages. Despite identifying potential deposits, large-scale commercial extraction has not yet materialized. The discovery of lithium reserves in Jammu and Kashmir requires significant investment and development time.
Missing Links in the Value Chain
India’s limited processing and refining capacities force reliance on other countries, primarily China. This gap increases costs and limits the economic potential of these resources, hindering the development of downstream manufacturing sectors.
Balancing Extraction and Ecology
The environmental impact of mineral extraction includes habitat destruction and water pollution. For instance, lithium mining in Ladakh raises concerns about water scarcity and biodiversity loss. Sustainable mining practices are essential to balance ecological preservation with mineral needs.
Price Volatility
The market for critical minerals is characterized by extreme price fluctuations. Rising lithium prices have affected the economics of EV production, creating uncertainty for investors and industries reliant on these minerals.
Measures Taken by Govt of India to Ensure Critical Minerals
India can adopt various strategies to secure and manage its critical mineral needs, including diplomatic efforts, circular economy development, technological advancements, and sustainable practices.
Critical Mineral Diplomacy
India should establish global alliances for resource security. Expanding the mandate of Khanij Bidesh India Limited and creating a Critical Minerals Intelligence Unit can help secure preferential access to minerals through strategic partnerships.
Circular Mineral Economy
Developing a circular economy for critical minerals involves advanced e-waste recycling technologies and creating a national database of end-of-life products. Specialized recycling zones can help recover valuable minerals from discarded electronics.
Mineral Tech Leap
Boosting technological capabilities in extraction and processing through a Critical Minerals Technology Mission, tax incentives for R&D, industry-academia partnerships, and technology transfer agreements can enhance India’s self-reliance.
GeoMapping Revolution
Modernizing domestic mineral exploration with advanced geological mapping techniques, AI, machine learning, and comprehensive aerial surveys can improve exploration efficiency. Encouraging private sector participation can further enhance capabilities.
Green Mining Initiative
Sustainable mining practices tailored to India’s ecological context are essential. Implementing strict environmental standards, developing land rehabilitation programs, and establishing a Green Mining Innovation Fund can promote environmentally responsible mining.
Skill India for Critical Minerals
Addressing the skill gap through specialized courses, vocational training centers, and a national certification program for critical mineral professionals can build a skilled workforce to support the sector.
Mineral Processing Parks
Establishing dedicated mineral processing zones with tax incentives, simplified regulatory processes, and world-class infrastructure can enhance domestic processing capabilities and support related industries.
Mineral-to-Market Corridors
Creating infrastructure corridors linking mineral-rich areas to processing hubs and markets, with smart logistics hubs, renewable energy sources, and data connectivity, can streamline the supply chain and support efficient mineral utilization.
Conclusion
India’s strategic push for critical minerals is a pivotal step towards achieving energy security, self-reliance, and sustainable development. By reducing import dependency and fostering domestic production, the nation can better navigate the complexities of the global mineral landscape. As future policymakers, UPSC aspirants must recognize the significance of these efforts in shaping India’s economic and environmental trajectory.
| UPSC Civil Services Examination, Previous Year Questions (PYQs) Mains Q. Discuss the importance of critical minerals for India’s economic and strategic interests. Highlight the challenges faced in securing these minerals. (GS Paper II, 2022). Q. Discuss the strategic significance of India’s participation in the Mineral Security Partnership (MSP) and other international collaborations for critical minerals. How do these partnerships align with India’s energy and economic security goals? |
