Explained | The push to bring the private sector into mineral exploration  Premium

The article explores the recently passed Bill which was made to attract private sector investment in the exploration of critical minerals. It allows for new exploration licences to be granted by the state government through competitive bidding and reserves the conduct of auctions for composite licence and mining lease for specified critical and strategic minerals for the central government. The Bill seeks to reduce reliance on imports for minerals, and increase exploration projects by allowing private sector participation. However, issues such as long timelines for clearances, and the lack of assurance of utilising discovered resources, remain.

The story so far: On August 2, Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2023, in a bid to attract private sector investment in the exploration of critical and deep-seated minerals in the country. The Bill puts six minerals, including lithium — used in electric vehicle batteries and other energy storage solutions — into a list of “critical and strategic” minerals. The exploration and mining of these six minerals, previously classified as atomic minerals, were restricted to government-owned entities.

The Russian invasion of Ukraine over the past year has made it clear more than ever how global supply chains of a range of commodities are vulnerable to shocks leading to a lack of availability and skyrocketing prices.

A variety of minerals, besides those used in creating fuel, are crucial to a country’s manufacturing, infrastructure, and advancement. Moreover, the clean energy transitions of countries including India, seeking to meet their net-zero emission goals, are contingent on the availability of critical minerals such as lithium, which has also been called ‘white gold’, and others including cobalt, graphite, and rare earth elements (REEs). These are also crucial for the manufacture of semiconductors used in smart electronics; defence and aerospace equipment; telecommunication technologies and so on. A World Bank study suggests that the demand for critical metals such as lithium (Li) and cobalt is expected to rise by nearly 500% by 2050.

The lack of availability of such minerals or the concentration of their extraction or processing in a few geographical locations leads to import dependency, supply chain vulnerabilities, and even disruption of their supplies. For instance, China has majority ownership of cobalt mines in the Democratic Republic of Congo, where 70% of the world’s cobalt is mined. China also has by far the largest amount of reserves of Rare Earth Elements (REEs) of any country in the world, followed by Vietnam, Brazil and Russia; it produces of 65% of the world’s REEs, which are crucial in making wind turbines, solar panels etc. India, meanwhile, has 6% of the world’s rare earth reserves but it only produces 1% of global output.

Major economies including the United States, United Kingdom, and European Union in the recent past have moved to secure supply-chain resilience for such minerals and to reduce reliance for their availability on countries like China. This has been done by way of the Mineral Security Partnership (MSP), which India became party to this year. Countries like the U.S., Australia, Japan, and the EU bloc have also created lists of critical minerals based on their specific economic needs and the supply risk of the minerals.

The Ministry of Mines, in June this year, came out with a list of 30 minerals critical to the country’s economic development and national security. However, India is highly dependent on imports for a majority of minerals on this list. For instance, as per figures quoted by the Ministry, India is 100% import-dependent on countries including China, Russia, Australia, South Africa, and the U.S. for the supply of critical minerals like lithium, cobalt, nickel, niobium, beryllium, and tantalum. In the case of lithium, for instance, India’s imports were worth $22.15 million in 2021-2022. As for the finished product lithium-ion batteries used in electric vehicles, a report by Fortune India notes that India imported 5,486.18 lakh units of lithium-ion batteries, spending $1,791.35 million.

Also for deep-seated minerals like gold, silver, copper, zinc, lead, nickel, cobalt, platinum group elements (PGEs) and diamonds, which are difficult and expensive to explore and mine as compared to surficial or bulk minerals, India depends largely on imports. For instance, in 2022-23, India imported close to 12 lakh tonnes of copper (and its concentrates) worth over Rs. 27,000 crore as per official figures. It imported 32,298.21 tonnes of Nickel worth Rs. 6,549.34 crore.