Critical Minerals and India's Manufacturing Ambitions

Critical minerals are essential components in many modern technologies such as stealth aircraft, drones, and mobile phones. These minerals include lithium, cobalt, nickel, manganese, gallium, germanium, indium, tantalum, niobium, and rare earths such as europium, yttrium, and terbium. India's manufacturing ambitions are hampered by limited domestic resources and processing expertise of these minerals, affecting the entire economy including manufacturing, services, and agriculture.

Importance of Critical Minerals

• Transition towards greater electrification in India requires enhanced electricity storage, which will increase the demand for minerals used in batteries and motors.
• Advancements in computing, digitalization, surveillance, artificial intelligence, and quantum computing rely heavily on critical minerals for electronic products.
• Defense needs are growing with a dynamic military-industrial complex in India, increasing the demand for minerals like titanium, tungsten, beryllium, and rare earths.

Government Initiatives

• India has identified critical minerals and is forming global partnerships like the Critical Minerals Partnership with countries including the United States, Japan, and Australia.
• Efforts to reduce bottlenecks are ongoing, including encouraging private participation in mining and processing, and incentivizing mineral processing capacities.

Challenges in the Value Chain

The critical minerals value chain faces a time mismatch which hinders the growth of the sector. The timeline for developing this value chain is as follows:

• Upstream mining: Takes about 15 years to become operational.
• Midstream processing: Requires 5-10 years to obtain permissions and establish a unit.
• Downstream manufacturing: Typically takes around 3 years to set up.

This temporal mismatch necessitates government intervention to prevent market failure and ensure a stable supply of critical minerals.

Policy Recommendations

• Align mining and processing timelines to reduce overall risk and market failure.
• Consider delaying the manufacturing of certain items until processing capacities are developed.
• Facilitate pre-clearance of mining permissions to reduce operational time and costs.
• Direct government involvement in processing stages to ensure availability of minerals for downstream manufacturers.

Approaches to Policy Intervention

• Implement a system similar to the Food Corporation of India, where the government buys and stores processed minerals for distribution.
• Establish a critical minerals trading entity to stabilize prices and ensure supply, prioritizing domestic processing units.
• Regulate a few selected private players in the sector to prevent profiteering.

The ultimate goal is to achieve price and quantity stability in the supply of critical minerals, ensuring the prosperity of India's manufacturing capabilities in key sectors.