India must take critical minerals as part of its strategic growth agenda: EY
KOLKATA: The growing use of electric vehicles and renewable energy in addition to increasing share of televisions, mobile phones in our consumption basket coupled with the government’s Make in India initiative with ambitious growth plans in 25 sectors, is tipped to enhance the need for critical minerals that these gadgets use.
In a just-released report EY has said India must assess its needs against the supply of these critical minerals and take it up as a part of its strategic growth agenda. Like many other countries, India needs a holistic and collaborative approach from policy makers, mining companies and user industry groups to achieve resource security.
The plan targets to add 227GW of renewable power by 2022 with electric vehicles (EVs) expected to account for 30% of all new vehicles by 2030. While introduction of EVs and telematics is changing the landscape of the automobile sector, growth in renewables and technology for battery storage is transforming the power and utilities sector.
While EVs are dependent on rechargeable batteries, solar energy is dependent on solar panels and solar cells, flat panel displays and LEDS are important components of the electronics and telecommunications industry.
All of these components require minerals with very specific properties and characteristics. Such critical minerals or as EY refers to them, “new world” commodities are central to the production of a variety of high tech and green technologies ranging from batteries, smartphones and laptops to advanced defence systems. However, lack of secured supply chain would substantially restrict the growth of the ‘new world’ industries, the report says.
Due to the very nature of the critical/strategic minerals and their relative smaller volumes, their market prices see large distortions triggered by demand-supply mismatch even for a small volume. This impairs a miner’s capacity to develop a sustainable project plan for these minerals which strains their supply sources.
The EY report touches upon sectors such as automobiles (electric vehicles), aerospace and defence, electronics and renewable energy which are a part of the Make in India policy and will also need most of the critical or rare minerals in some form.
“Most of these industries are still in nascent stages in India and thus their current consumption of these minerals is low. Additionally, for few of the industries, current focus appears to be sourcing and assembling components instead of indigenous production.
It is expected the strategy will move towards more indigenous production and as that happens, the need for these critical minerals will increase exponentially,” the report says.
Anjani K Agrawal, Partner and Leader – Metals & Mining, EY: “A number of initiatives like EV, renewables energy, Make in India, defence & aerospace etc. need several minerals. Many of those minerals are not yet discovered/available or produced in India. Securing their supply will be critical for success of those programs.”
However, known sources of minerals are finite and there is significant concentration of reserves in a few countries. Several such countries in conflict zones. Risks are further compounded due to the governments of resource rich countries adopting a conservation approach for their own future needs.
To help identify the strategically critical minerals in the Indian context, EY analysed the global concentration of reserves and production and developed a supply confidence score for such sources viz a viz India’s import dependence for those minerals.
“Resources of many critical minerals relevant to modern industrialisation and sustainability goals are concentrated in few countries. The risk is aggravated further either due to their own development needs or the geopolitical risks in many resource rich countries. It would be an imperative for India’s progress to take this as a strategic agenda. For items where we have resource scarcity, strategic M&A, off-take arrangements may be the path to secure success,” according to Agrawal.
Other key suggestions in the report include, providing an impetus to domestic exploration, mining and processing sector as well as strategic acquisitions / joint ventures outside the country with off-take arrangements. The government should also encourage R&D and provide incentives to develop a recycling industry to recover these minerals, the report says.