EDITORIAL 1: Minding the minerals gap
Context
On July 3, the foreign ministers of the Quad countries — India, Japan, Australia and the US — announced the launch of the Critical Minerals Initiative for collaboratively securing and diversifying supply chains.
A recent global crisis
- A recent global crisis in rare earth magnets after Beijing’s imposition of export controls has shown that India’s green industries face significant strategic and economic risks due to heavy dependence on China.
- Essential enablers of India’s green transition, critical minerals are vital for manufacturing technologies such as electric vehicles, solar panels, batteries, and semiconductors.
- With unexplored domestic reserves and a late start in the global race, India has recently signed a flurry of bilateral minerals partnerships.
- Agreements with resource-rich countries such as Argentina and Zambia aim to facilitate exploration and mining by the Indian government and firms overseas.
- However, Indian companies often lack advanced extraction technology and sufficient financial capital to commercialise domestic mining as well as operate competitively in foreign markets.
- Moreover, their hesitancy about investing abroad in politically unstable jurisdictions highlights the urgent need for de-risking mechanisms and concessional finance to support overseas ventures.
- Meanwhile, India’s partnerships with countries like the UAE, the US and the UK focus primarily on joint ventures for mineral processing and recycling.
- Yet, without assured and stable supplies of critical minerals, such processing hubs risk becoming economically unviable, raising the possibility of stranded assets.
- These agreements must, therefore, be backed by long-term arrangements and embedded in broader supply-chain strategies to ensure their sustainability.
Solutions
- Minilaterals, or “clubs”, offer a unique solution where India and partner countries coordinate and co-develop projects.
- These small groupings of like-minded partners allow for joint technical, financial, and diplomatic resources to support innovation across the minerals value chain.
- They overcome financial constraints for Indian ventures by tapping into a broader pool of capital, blended finance mechanisms and export credit agencies.
- Indian companies can also leverage advanced technological expertise from countries such as Australia and Japan regarding exploration, mining and processing.
- The Minerals Security Partnership (MSP), of which India is part, offers ready-made structures for co-financing and strategic project selection.
- Clubs allow India to ensure economic security, diversify supply chains, forge resilient partnerships, and secure its place in the emerging clean-tech order.
The risk
- There is a risk that India will be labelled a destination for storage, transit and processing, while higher value-addition activities such as refining and manufacturing of components could be situated in developed countries.
- India, once again, risks becoming a demand centre and market for finished goods.
- India must ensure that it prioritises domestic capacity building and scientific innovation by negotiating and including clauses for investment in R&D and academic exchanges.
- Further, commercialisation and scaling up of existing ventures in refining, recycling and clean-tech manufacturing — batteries, EVs, advanced materials — must be integrated into a multi-pronged approach along the entire value chain.
Government initiatives
- India’s ambitions under “Make in India” and “Atmanirbhar Bharat” seek to make the country self-reliant on critical minerals and green technologies, while creating incentives for exports-based minerals industries.
- However, increasingly, this requires compliance with global environmental, social and governance (ESG) standards.
- Through participation in these clubs, India can influence discourse around ESG standards, presenting the Global South perspective as opposed to unilateral imposition from Western countries.
- Membership also encourages India to take a more structured approach to its own domestic ESG practices, aligning industry with partner countries.
Way forward
- India’s historical ties and growing influence with Africa and Southeast Asia are a key reason for Western countries to engage with it for the extraction of minerals.
- India can champion the concerns of Global South countries, calling for inclusive growth and developmental sovereignty.
- India should leverage its role as a bridge between the Global North and South, to position itself as a credible economic and developmental partner for mutual benefit
- India must remain true to its development ethos while engaging strategically to create equitable global value chains, without becoming extractive or overly reliant on great power blocs.