Answer

China dominates over 60% of global rare earth production, 60% of critical mineral output, and 80% of processing capacity, which are vital for green technologies and defense sectors. The IEA’s 2023 report highlights this dominance as a significant risk to global supply chain stability. In response, India’s Critical Minerals Development Strategy 2023 focuses on diversifying sources and achieving mineral self-reliance to mitigate vulnerabilities amid escalating geopolitical tensions.

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China’s Strategic Control over Critical Minerals: Impact on Global Supply Chains

• Monopoly on Supply: China dominates the mining and refining of critical minerals, leveraging its position to disrupt global supply chains for high-tech industries.
  For example: China controls over 60% of rare earth minerals’ global production, vital for semiconductors and renewable energy.
• Economic/Export Weaponization: Strategic export restrictions on critical minerals create supply chain vulnerabilities for countries reliant on these resources for advanced technologies.
  For example: In 2023, China restricted gallium and germanium exports, impacting global semiconductor and electronics manufacturing.
• Technological Dependency: Nations dependent on China for raw materials face delays and price surges, slowing innovation in critical sectors like batteries and aerospace.
  For example: The U.S. faced increased costs for defence technologies due to China’s embargo on rare earth exports in 2010.
• Supply Chain Disruptions: Global manufacturing industries are forced to diversify suppliers or relocate operations, increasing costs and reducing efficiency.
  For example: The EU launched the European Critical Raw Materials Act to reduce dependency on Chinese rare earths.
• Slower Green Transitions: Critical minerals are vital for renewable energy technologies like solar panels, wind turbines, and electric vehicles. Export restrictions delay the global transition to clean energy by creating bottlenecks in renewable energy supply chains.

India’s Policy Response through Its Critical Minerals Development Strategy

• Identification of Critical Minerals: India classified 30 critical minerals essential for national security to focus exploration and production efforts.
  For example: Lithium and cobalt were prioritized for domestic mining and acquisition abroad through KABIL.
• Regulatory Reforms: The Mines and Minerals (Development and Regulation) Amendment Act, 2023 lifted restrictive classifications on rare earth elements, allowing private and foreign investment in the sector.
  For example: Exploration licenses were introduced, allowing reconnaissance of lithium deposits in Jammu & Kashmir.
• Establishment of KABIL: The government set up Khanij Bidesh India Ltd. to secure overseas investments and ensure a stable supply of critical minerals.
  For example: KABIL signed MoUs with Argentina and Australia for lithium and cobalt exploration.
• Exploration Incentives: A 50% reimbursement policy for exploration expenditure aims to attract private players into early-stage operations.
  For example: NMDC began exploring rare earths with the assurance of fiscal reimbursements post-mining.
• Focus on Technology Partnerships: Efforts to collaborate internationally for technological expertise and resource-sharing are critical for strengthening the sector.
  For example: India partnered with Australia under the India-Australia Critical Minerals Investment Partnership in 2022.

Challenges India Might Face in Critical Mineral Development

• Inadequate Geological Data: The lack of advanced geological surveys leads to poor resource classification, making potential mining blocks risky for investors and causing low bidder interest.
• Limited Private and Foreign Participation: Despite reforms, foreign and private firms are hesitant to invest due to unclear policies and risks associated with India’s resource classification and exploration frameworks.
  For example: Since the 2023 amendments, only a few exploration licenses for lithium and rare earth elements have been issued, mostly to public sector firms.
• Delays in Policy Implementation: Though reforms have been introduced, sluggish implementation and bureaucratic hurdles have deterred progress in critical mineral exploration and production.
  For example: Lithium deposits found in Jammu and Kashmir’s Reasi district in 2023 remain untapped due to a lack of industry participation and operational clarity.
• Dependence on Imports for Critical Technologies: India relies on imports for advanced technologies needed for exploration and extraction, limiting domestic capacity to process critical minerals.
  For example: The lack of technology for lithium-ion battery manufacturing has kept India dependent on imports from China and other countries.

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Measures to Strengthen India’s Position in Critical Minerals Sector

• Modernizing Exploration Techniques: Invest in advanced geological surveys to reduce uncertainty and attract private sector participation in critical minerals exploration.
  For example: Satellite-based mineral mapping programs can enhance the precision of identifying potential resource deposits.
• Providing Upfront Fiscal Support: Direct financial aid during the exploration phase can offset high initial costs and incentivize private and foreign investments.
  For example: Similar to semiconductor manufacturing, upfront capital support can de-risk lithium and graphite mining projects.
• Boosting Domestic Production Capacity: Establish processing and refining units to reduce dependency on imports for value addition and finished goods production.
  For example: A lithium refinery is being planned in Gujarat to process domestic and imported lithium.
• Expanding International Collaborations: Strengthen bilateral agreements with resource-rich nations to secure mineral supplies and reduce risks of supply chain disruptions.
  For example: The India-Chile Free Trade Agreement has provisions for critical minerals trade, focusing on lithium.
• Developing Strategic Reserves: Build reserves of critical minerals to mitigate supply shocks and ensure the availability of resources during global disruptions.
  For example: India’s strategic petroleum reserve model can be replicated for critical minerals like rare earths and lithium.

To reduce dependency on China, India must ensure domestic exploration, strengthen global partnerships (e.g., with Australia and Japan), and incentivize private investments in critical minerals. Initiatives like the KABIL (2023) and adherence to international norms on mineral sourcing can bolster India’s global standing while securing supply chain resilience for green and defense technologies.

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