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Dependency on minerals import risks India’s green tech progress: ICRA – EQ

Dependency on minerals import risks India’s green tech progress: ICRA – EQ


In Short : ICRA has warned that India’s reliance on mineral imports could jeopardize its progress in green technology. This dependency poses risks to the supply chain, potentially hindering the development and deployment of renewable energy and other green technologies essential for sustainable growth.

In Detail : According to the report, there has been a gradual shift in global energy policy priorities from fuel and energy security to mineral security

India’s dependency on imports for critical minerals such as lithium, cobalt, and nickel poses a significant risk to its green technology transition and energy security, as highlighted in a recent report by rating agency ICRA. The report indicates that despite efforts to boost domestic production through auctions, the commercialisation of exploration blocks may not yield tangible benefits until after 2030. This delay could leave India’s downstream manufacturing vulnerable to potential supply disruptions in the interim.

The three-part series on critical minerals highlights that the quality and quantity of domestic lithium are inferior to global standards, potentially hindering India’s efforts to reduce import dependence in the near future. Despite the auction of 38 mineral blocks to boost domestic production, the benefits are unlikely to materialise this decade, leaving India vulnerable to potential supply shocks.

Commenting on the industry trends, Girishkumar Kadam, senior vice-president and group head, corporate sector ratings, ICRA, said: “Global deposits of critical minerals are more concentrated than most industrial minerals, fossil fuels, and hydrocarbons. Additionally, China dominates the processing and refining of critical minerals, controlling between 65 per cent to 100 per cent of the global capacity to make battery grade lithium, cobalt, manganese, and graphite.”

This reliance poses a significant risk to the country’s energy security as it strives to meet its net zero commitments by 2070.

“The accelerated pace of adoption of green technologies like electric vehicles, renewable energy (solar and wind), and green hydrogen in the post-Covid era is expected to result in a surge in demand for critical minerals, which would entail a significantly greater number of domestic mines to support the green economy of the future,” the report highlights.

Due to the high risks involved in exploring deep-seated or critical minerals compared to surface or bulk minerals, the Government of India has recently initiated the auction of exploration licences. This strategy is designed to attract specialised overseas mining companies by offering a more favourable risk-return framework.

The report recommends investing in circular supply chains, given India’s limited primary resources of critical minerals, to ensure raw material security and reduce imports.

According to the report, there has been a gradual shift in global energy policy priorities from fuel and energy security to mineral security.

Global supply chains for critical minerals are vulnerable to supply shocks from key producing and processing regions, leading to heightened price volatility. As a result, countries are increasingly seeking to enhance self-sufficiency and reduce import reliance. In this context, India’s endeavours to bolster domestic production of critical minerals are vital for ensuring energy security.

India is also pursuing international strategies to reduce its dependency. It is actively seeking to acquire critical mineral assets in countries such as Argentina, Chile, Australia, and several African nations, including Zambia and Congo. Domestically, there is a need to incentivise the development of critical mineral processing technologies like beneficiation and leaching, according to ICRA.

With China gaining a significant lead in this area, developed economies like the US and the European Union are increasingly looking at rebuilding critical mineral supply chains nearer to shore. While the GoI has allocated 30 per cent of the overall Production Linked Incentive (PLI) scheme to green energy technologies like solar PV, battery, and green hydrogen, such incentives are missing in the area of exploration, mining, and processing of critical minerals where India’s domestic capabilities are at a nascent stage, ICRA said.

Therefore, there is a requirement for incentivising domestic capability in critical mineral processing technologies like beneficiation and leaching, it added.

“The government is currently auctioning two lithium blocks. One located in Jammu and Kashmir contains clay deposits. While the technology for extracting lithium from hard-rock and brine deposits has matured, extracting lithium from clay deposits remains untested globally,” Kadam stated, highlighting the technological and commercial obstacles ahead.

India’s strategy involves joining the US-led Mineral Security Partnership and strengthening domestic regulations such as the Battery Waste Management Rules to prioritise circular supply chains for minerals. However, ICRA cautions that the required infrastructure to achieve the government’s ambitious targets for critical mineral recycling is yet to be established.

Anand Gupta Editor - EQ Int'l Media Network