India’s Union Budget 2024-25 targets energy security with customs duty exemptions for lithium and other critical minerals

The Union Budget 2024-25 emphasizes energy security by proposing targeted customs duty exemptions for critical minerals, including lithium. This initiative aligns with India’s goals to enhance its electric mobility transition and zero-emission targets. Lithium-ion batteries, crucial and costly components in electric vehicles (EVs), stand to benefit from reduced resource and production costs due to this measure, fostering manufacturing growth and innovation in electric mobility solutions.

Understanding critical minerals:

Supported by

• Definition: Critical minerals are vital for economic growth and national security. Their scarcity or concentration in limited regions can lead to supply chain vulnerabilities.
• Key characteristics:
  • Essential for technology: Critical minerals are integral to clean energy technologies, electronics, defense, and healthcare.
  • Geopolitical importance: Their supply is often concentrated, leading to potential disruptions and price volatility.
  • Environmental impact: The extraction and processing of these minerals can have significant environmental consequences if not managed responsibly.

Critical minerals for India:

The Ministry of Mines has identified 30 crucial minerals for India’s technological and renewable energy sectors. The formation of a committee to regularly update the list and strategize critical minerals is underway. These include:

• Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium, Germanium, Graphite, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, Platinum Group Elements, Phosphorous, Potash, Rare Earth Elements, Rhenium, Silicon, Strontium, Tantalum, Tellurium, Tin, Titanium, Tungsten, Vanadium, Zirconium, Selenium, and Cadmium.

Why critical minerals are important:

1. Energy transition and electric mobility:
   • Critical minerals, especially lithium, are vital for India’s clean energy and electric mobility goals.
   • Lithium imports surged from ₹13,673.15 crore in FY2022 to ₹23,171 crore in FY2023.
   • The customs duty exemption aims to accelerate EV adoption and reduce production costs.
2. Space exploration and satellite technology:
   • Rare earth elements are essential for India’s space program, including satellite and spacecraft production.
   • India’s space ambitions, such as the Gaganyaan mission and a planned space station by 2035, rely on these minerals.
3. Renewable energy infrastructure:
   • Minerals like indium, gallium, and tellurium are crucial for solar PV technology, while rare earth elements support wind turbines.
   • Securing these resources supports India’s renewable energy targets and reduces fossil fuel dependence.
4. Digital economy and telecommunications:
   • Critical minerals are essential for India’s growing digital economy and 5G networks.
   • Minerals like gallium, indium, and tantalum are crucial for electronics and telecommunications infrastructure.
5. Semiconductors and advanced technologies:
   • Key minerals such as silicon, germanium, and gallium are fundamental to semiconductor production.
   • India’s Semiconductor Mission and National Quantum Mission depend on these materials.
6. Geopolitical influence:
   • Securing critical minerals enhances India’s geopolitical standing and bargaining power.
   • Participation in global forums and bilateral agreements reflects India’s proactive approach.

Challenges and measures:

• Import dependency: India’s reliance on imports poses economic and strategic risks. China dominates processing, with 67% of lithium and 73% of cobalt processing.
• Exploration conundrum: Domestic exploration is nascent, with recent discoveries requiring significant investment and time.
• Processing and refining gaps: Limited domestic processing capacity forces reliance on imports, increasing costs and limiting economic benefits.
• Environmental impact: Balancing mineral extraction with ecological preservation is challenging, especially in sensitive regions like Ladakh.
• Price volatility: Fluctuating mineral prices affect manufacturing costs and investment stability.

Proposed measures:

1. Critical mineral diplomacy:
   • Strengthen global alliances and negotiate government-to-government deals.
   • Create a Critical Minerals Intelligence Unit to monitor trends and opportunities.
2. Circular mineral economy:
   • Develop advanced e-waste recycling technologies and a national database for end-of-life products.
3. Mineral tech leap:
   • Establish a Critical Minerals Technology Mission and incentivize R&D in mineral technologies.
4. GeoMapping revolution:
   • Employ advanced mapping techniques and encourage private sector exploration.
5. Green mining Initiative:
   • Implement strict environmental standards and develop sustainable mining practices.
6. Skill development:
   • Introduce specialized courses and vocational training in critical mineral sectors.
7. Mineral processing parks:
   • Establish dedicated processing zones with tax incentives and infrastructure support.
8. Mineral-to-market corridors:
   • Develop infrastructure corridors linking mining areas to processing hubs with integrated logistics and renewable energy sources.

India’s strategic approach to managing critical minerals will play a crucial role in advancing its technological capabilities, energy security and economic growth.