India’s Mineral Requirements in a World of Economic and Geopolitical Transition

Executive Summary

Minerals, until recently a mundane subject, have gained widespread public attention. In 2022–2023, several developments drew global attention to minerals now deemed “critical” for their essential role in renewable energy, electronics, high-tech equipment, and defence industries. The simplest explanation for this surge in activity is that our high-tech, digital world, transitioning to low-carbon energy, has been made conscious of its mineral roots. It is increasingly recognised that the transition away from fossil fuels, which provide 80% of the world’s primary energy, will create a mineral-dependent global economy. Policymakers planning for Net Zero Emissions (NZE) by mid-century now acknowledge the criticality of minerals in supply chains for decarbonising energy and industry. India is experiencing faster economic growth, with a greater role in manufacturing, while taking up the challenge of a rapid energy transition. The mineral economy is thus one of increasing significance.

Historically, major economic powers recognised the vital role of key minerals for their prosperity. China, as it embarked on rapid industrialisation in the 1980s, was always cognisant of raw material requirements, particularly essential minerals. In 1999, China embarked on a “Go Global” strategy, buying mineral reserves abroad.

The growing sense of the importance of minerals has become specific because of their role in decarbonisation and the transition to a world of non-fossil energy systems. The 2015 Paris Accords brought minerals into popular discourse. In the years after the Paris Accords, global goalposts shifted to targets for achieving NZE by mid-century. A 2019 World Bank report, “The Mineral Intensity of the Clean Energy Transition,” found that the production of minerals such as graphite, lithium, and cobalt could increase by nearly 500% to meet the growing demand for clean energy technologies.

As minerals are now recognised as the foundation for future energy systems, securing the supply of minerals deemed critical has become a key feature of the national security calculus of the world’s major powers. There has also been a transformation of international relations, marked by growing geopolitical competition between the US and China. The US and its allies have rapidly become aware of China’s predominance in the mining and processing of key minerals. As US-China relations have become not just competitive but adversarial, existing economic and technological frameworks have begun to splinter, leading to moves now underway to restructure global supply chains. In June 2022, 11 countries set up the Mineral Security Partnership (MSP) to “catalyse investment in responsible critical mineral chains globally”; India joined in June 2023.

The path to NZE will call for a massive transition in global economies. Solar and wind energy for electricity, Electric Vehicles (EVs), and hydrogen all require critical minerals.

India has a great historical legacy in mining and metallurgy. In the post-independence era, there was considerable investment in mining. However, India’s mineral sector was bogged down by slow-moving bureaucratic procedures and overregulation. A new National Mineral Policy in 1993 opened the sector to private and foreign investment, but did not materially change the scenario.

Despite the efforts of successive governments, mining in India remains a story of potential locked underground. Mining generates only about 2% of Gross Domestic Product (GDP), as against 7.5–12% in other mining jurisdictions like Australia and South Africa, with whom we share geological characteristics. Presently, only 30% of India’s obvious geological potential has been properly explored. Imports of minerals and metals cost India US$157 billion in 2022. For four minerals critical for renewable energy—copper, nickel, lithium, and cobalt—India is 93–100% dependent on imports.

At the Conference of the Parties in Glasgow in 2021 (COP 26), India joined the NZE bandwagon with a target date of 2070. The more immediate targets are for 2030, including renewable energy generation to be stepped up to 500 GW. This increase will lead to a massive increase in mineral requirements. In June 2023, the Ministry of Mines (MoM) released a report identifying 30 critical minerals for India. Securing these minerals will require policy measures enhancing private sector participation and incentives for exploration. The time has come for policymakers to plan a critical mineral stockpile.

Despite India’s excellent geological potential, there are many identified minerals for which we will continue to rely on imports. There is a need to build external supply chain partnerships. For India, exchanging dependence on the Organisation of the Petroleum Exporting Countries (OPEC) for oil with China for critical minerals is a recipe for disaster. India’s membership in the MSP is a step forward, not only because it can enable it to become part of supply chains for mineral security: the MSP declares that the group will help countries get the full economic benefits of their geological endowments.

It is crucial to keep in mind the need for India to develop its resources. The time has come for a new perspective on mining in India. In the future, the capacity for mining and metallurgy will become a part of the calculus of national power and strategic capabilities. Sourcing more minerals within the country can save over US$100 billion in imports every year. Mining’s contribution to GDP can be at least doubled from the 2% presently and become a source of large-scale employment. At the social level, mining needs a paradigm shift in popular perception to a more balanced understanding of its essentiality. Local communities have to be stakeholders in sustainable mining. The growing consensus on the unavoidable need for increased mineral use for the energy transition provides an opportune occasion to alter the popular discourse regarding the mineral economy of India.

This paper analyses the global and domestic challenges facing India’s mineral economy. With a strategic shift, India can not only secure its own critical mineral needs but also become a key player in global mineral supply chains. To achieve this, the paper proposes a comprehensive policy framework with the following key recommendations:

• Strengthening Domestic Mining:
  • Incentivise high-risk exploration by adopting an Exploration and Production (E&P) licensing model and consider offering incentives like those used in other mining jurisdictions.
  • Secure the social license to operate by ensuring local communities become direct beneficiaries. District Mineral Foundation (DMF) funds should be efficiently and transparently utilised to this end.
  • Establish a National Critical Mineral Stockpile to buffer against supply shocks and geopolitical volatility.
• Securing External Supplies of Minerals:
  • Empower Khanij Bidesh India Ltd (KABIL) to proactively acquire and develop strategic mineral assets abroad, taking inspiration from the model of Oil and Natural Gas Corporation (ONGC Videsh).
• Enhancing Global Mineral Cooperation:
  • Actively leverage the MSP, and other international partnerships, to co-invest in responsible mining projects and learn from the best practices of advanced mining jurisdictions.