Call Us Now

+91 9606900005 / 04

For Enquiry

legacyiasacademy@gmail.com

Creating Robust Mineral Supply Chains

Context

  • Prime Minister Modi encouraged the country to pursue Aatmanirbharta in energy by focusing on clean energy technologies in his Independence Day address.
  • The article emphasises the importance of securing access to key minerals such as lithium, cobalt, nickel, and rare earth metals, among others, in order to build resilient and indigenous supply chains for clean energy technologies.

Relevance

GS Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

Mains Question

Do you believe that bestowing the Nobel Peace Prize on certain individuals and organisations strengthens the voices of peace and human rights around the world and in India? Express your thoughts. (250 words)


Background

  • As countries around the world accelerate their transition to clean energy, demand for critical minerals required for clean energy and other technologies is expected to skyrocket in the coming decades.
  • In addition, India’s concerns grew as a result of the country’s exclusion from the recent Minerals Security Partnership.

Concerning the Minerals Security Partnership (MSP)

  • Description: It is an 11-member ambitious new US-led partnership to secure critical mineral supply chains and reduce reliance on China.
  • Goal: The MSP’s goal is to ensure that critical minerals are produced, processed, and recycled in a way that allows countries to realise the full economic development benefit of their geological endowments.
  • Key Focus: The supply chains of minerals such as cobalt, nickel, lithium, and the 17 “rare earth” minerals would be the focus.
  • China’s alternative: The alliance is seen as part of a global ‘China-plus-one’ strategy implemented following the Covid-19 pandemic, which caused massive supply-chain disruptions.
    • China has built a rare earth mineral processing infrastructure and acquired mines in Africa for elements such as cobalt.
    • China Plus One: This is a business strategy that involves investing in countries other than China.

Concerning Critical Minerals

  • Definition: A “critical mineral” is a non-fuel mineral/mineral material that is essential to economic or national security and has a supply chain that is vulnerable to disruption.
    • These are the fundamental components of modern technologies.
  • Importance: These are crucial as the world rapidly transitions from a fossil-fuel-intensive to a mineral-intensive energy system.
  • Examples: EV batteries are made from graphite, lithium, and cobalt.
    • The aerospace, communications, and defence industries all rely on such minerals, which are used in the production of fighter jets, drones, radio sets, and other critical equipment.

The Importance of Critical Minerals in India

  • Mobility shift: One of the key elements of India’s growth strategy is an ambitious plan to convert a large portion of its transportation to electric, which would necessitate critical minerals.
    • By 2030, 80 percent of the country’s two- and three-wheeler fleet, 40 percent of buses, and 30 to 70 percent of cars will be EVs, according to the plan.
  • Electronics manufacturing push: According to the government’s vision document, electronics manufacturing in India will quadruple to $300 billion by 2026, emphasising the importance of ensuring the supply of critical minerals.
  • Imported inflationary pressures: Exposure to volatile oil and gas markets also poses risks to macroeconomic growth and stability, especially for India, which imports approximately 85% of its oil and half of its gas needs.
    • As a result, securing access to critical minerals like lithium, cobalt, nickel, and rare earth metals is critical for developing resilient and indigenous supply chains for clean energy technologies.
  • Global insecurity: Concerns about the pricing and availability of oil and gas in the aftermath of the Ukraine crisis are fueling global policy debates about energy security.
    • However, the fragility of clean energy supply chains makes it difficult for countries to reduce their reliance on fossil fuels.

A difficult task

  • Limited availability: For starters, reserves are frequently concentrated in geopolitically sensitive or difficult-to-do-business regions.
  • Global competitors: Second, geostrategic competitors control a portion of existing production.
    • For example, through direct equity investments and its Belt and Road Initiative, China wields significant influence in cobalt mining in the Democratic Republic of the Congo.
  • Pre-determined agreements: Third, future mine production is frequently tied down in advance offtake agreements by buyers from other countries to meet upcoming demand.
    • Offtake agreements are contracts to buy or sell future goods in advance. An offtaker agrees to purchase the majority of the project’s output.

India’s previous actions concerning Critical Minerals

  • Critical Minerals Investment Partnership: It was signed in 2022 by India and Australia to strengthen their partnership in the field of critical mineral projects and supply chains.
  • Lithium Agreement: In mid-2020, India signed an agreement with an Argentine firm to jointly prospect lithium in Argentina, which has the world’s third largest reserves of the metal.
  • Public undertaking: In 2019, the Indian government established Khanij Bidesh India Limited (KABIL) with the mission of ensuring domestic mineral supply.
  • Draft strategy: In 2016, India’s Department of Science and Technology drafted the Critical Minerals Strategy for India in collaboration with the Council on Energy, Environment, and Water, with a focus on India’s resource requirements through 2030.
    • According to the Indian Critical Minerals Strategy, 49 minerals are critical to India’s future economic growth.

Steps to obtaining strategic minerals

  • Calculate the mineral requirements of domestic industry: This could be done by a task force comprised of the ministries of power, new and renewable energy, heavy industry, and science and technology.
    • Outlining a framework: Creating five-year road maps with clear targets for deployment and indigenous manufacturing across clean energy applications would give domestic investors visibility.
    • Estimate production: Additionally, evaluate the technology mix that would support this deployment and the quantities of minerals required to support indigenous manufacturing.
  • Necessary intervention: The domestic industry can assist in determining where strategic interventions by the government are required
  • KABIL, for example, could work with domestic industry to improve its market intelligence capabilities for tracking global supply-side developments.
    • A quotation of available and committed production capacities across the economy, as well as sector-specific policy developments, can help to develop an informed view of mineral supply.
    • The private sector should also be encouraged to secure minerals in favourable geographies for its own needs.
  • Offtake agreements: In the absence of favourable investment opportunities, KABIL should enter into offtake agreements with global mineral suppliers in advance to secure future production.
    • Centralized procurement: KABIL could accumulate a reliable supply of minerals for domestic requirements and sign sales agreements with domestic industry through large-scale centralised national procurement
  • Joint investment: The government could partner with geostrategic partners or private sector entities with expertise in specific geographies to invest in mining assets.
    • The External Affairs Ministry could initiate conversations with partner countries, such as establishing resilient clean energy supply chains, which is a Quad priority.
  • Tailored technology: The government should support technologies that use locally available materials and could even propose co-development with geostrategic partners
    • For example, the use of technologies such as sodium-ion batteries could reduce the need for minerals sourced outside of India’s borders.
  • New policy framework: Policies aimed at recycling mineral inputs from deployments that have reached the end of their useful life could be developed. These could help reduce reliance on international sourcing even further.

Download PDF
December 2022
MTWTFSS
 1234
567891011
12131415161718
19202122232425
262728293031 
Categories