Critical Minerals Strategy of India

India’s participation in Pax Silica and G7 critical minerals reflects proactive strategic diplomacy. However, weak domestic exploration, slow timelines, and policy gaps limit the real impact of diversification.
Pax Silica Initiative: It is a US-led strategic initiative to secure the end-to-end silicon and AI supply chain, from critical minerals and energy inputs to semiconductors and logistics.

What are Critical Minerals?

A critical mineral is a metallic or non-metallic element crucial for modern technologies, economies, and national security, with the potential risk of disruptions to its supply chains. It includes both primary and processed minerals.
- A mineral is critical when the risk of supply shortage and associated economic impact is (relatively) higher than that of other raw materials.
Countries create their own critical minerals list based on strategic needs.
These are minerals essential to economic development and national security.

Critical Minerals of India

GoI has unveiled the country’s first report on “Critical Minerals for India” and has identified 30 critical minerals, including nickel, titanium, vanadium, tungsten, etc.
The identification of the critical minerals is a part of multiple strategic value chains, which include:
- Clean technologies initiatives (such as zero-emission vehicles, wind turbines, and solar panels).
- Information and communication technologies (including semiconductors).
- Advanced manufacturing inputs and materials (such as defence applications, permanent magnets, and ceramics).
30 critical minerals of India are Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium, Germanium, Graphite, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, PGE, Phosphorous, Potash, REE, Rhenium, Silicon, Strontium, Tantalum, Tellurium, Tin, Titanium, Tungsten, Vanadium, Zirconium, Selenium and Cadmium.

Need for a Critical Minerals Plan for India

Import Dependence: India imports over 90% of lithium, cobalt, and rare earths, exposing clean energy and defence sectors to supply shocks.
Energy Transition: Net-zero 2070 and EV targets demand secure supplies of lithium, nickel, and copper at scale.
China Dominance: China controls ~60% of rare earth processing and over 70% of lithium refining, creating strategic vulnerability.
Industrial Growth: Make in India in EVs, batteries, solar, and semiconductors needs assured domestic and overseas mineral access.
Supply Resilience: A national plan can integrate exploration, overseas assets, recycling, and stockpiling to reduce disruption risks.

Key Issues in India’s Critical Minerals Plan

India’s critical minerals sector faces structural and governance challenges across exploration, mining allocation, and taxation, limiting domestic readiness despite growing strategic and diplomatic momentum.

Exploration & Project Pipeline

Low Exploration Base: Less than 20% of India’s geological potential has been explored; capacity remains dominated by public agencies like the Geological Survey of India (GSI).
Weak EL Incentives: Exploration Licence (EL) lacks a preferential right to mine & offers only 50% cost reimbursement capped at ₹20 crore vs ~₹150 crore exploration cost, deterring serious explorers.
Long Project Timelines: The global average mining project cycle from discovery to production is 16+ years (IEA); in India, it often takes longer due to approvals and litigation.

Mining Allocation & Market Design

Auction Model Weakness: Post-2015 auction-only concessions create high upfront capital risk and don’t attract serious merchant miners or junior explorers.
Bid Distortion: Overbidding (sometimes exceeding reserve valuation) skews blocks toward captive miners, who can offset losses via the downstream industry, hurting open-market competition.
Cancelled Pipeline Shock: Around 66,000 pending applications from the pre-2015 First-Come, First-Served regime were auto-cancelled, deepening investor uncertainty.

Taxation & Federal Uncertainty

High Effective Tax Burden: Despite rationalised critical mineral royalties (2–4%), the overall statutory burden makes the effective tax rate ~60–65% for mining firms.
Federal Tax Risk: Supreme Court (2024) upheld states’ power to levy additional taxes (royalty not a tax), raising cost unpredictability and discouraging mine operationalisation.

What has India Improved Recently?

Policy Push: MMDR Amendment Bill, 2025 prioritised critical minerals and aimed to streamline concessions, signalling urgency for energy transition supply chains.
Private Entry: Six minerals removed from the “atomic minerals” list, allowing private participation.
Market Flexibility: Captive mines can now sell in the open market without caps, improving commercial viability and reducing downstream distortions.
Overseas Asset Focus: National Mineral Exploration Trust (NMET) has been repositioned to fund international mineral projects, strengthening India’s resource diplomacy and supply security.

Way Forward

Exploration Mission: Launch time-bound exploration drive for critical minerals using private tech, satellite & geophysics via GSI + private Joint Venture model.
Shared Risk Model: Fund projects on a pari passu (equal sharing) basis, so both Centre and private miners share costs and risks from the start.
Auction Redesign: Shift two-stage iterative bidding into a single sealed-bid to curb overbidding.
EL Incentive Upgrade: Provide preferential rights or tax rebates for junior explorers to offset losses; E.g., Australia/Canada-style exploration incentive frameworks.

Securing critical minerals is not just diplomacy; it’s destiny. India must turn strategic engagements into domestic action by streamlining exploration, ensuring fair allocations, and incentivising investment to become a resilient global minerals powerhouse.

Reference: The Indian Express | PMFIAS: India’s Critical Minerals Diplomacy

PMF IAS Pathfinder for Mains – Question 524

Q. India’s engagement with Pax Silica and G7 critical minerals talks reflects diplomatic momentum, but domestic readiness remains its weakest link. Critically examine the structural and governance challenges and suggest a coherent roadmap to bridge the gap between external diplomacy and internal capacity. (250 Words) (15 Marks)

Approach

Introduction: Write a contextual introduction about critical mineral diplomacy by mentioning the recent update.
Body: Discuss how India’s engagement with Pax Silica and G7 critical minerals talks reflects diplomatic momentum. Then address structural and governance challenges and suggest a coherent roadmap to bridge the gap between external diplomacy and internal capacity.
Conclusion: Stress the importance of adopting a balanced approach to bridge the gap between external diplomacy and internal capacity.