Mineral Supply Chains

Context: In his Independence Day address, Prime Minister of India  exhorted the country to pursue Atmanirbharta in energy by focusing on clean energy technologies. Concerns over the pricing and availability of oil and gas in the wake of the Ukraine crisis continue to fuel global policy debates on energy security.

• However, the fragility of clean energy supply chains obscures pathways for countries to reduce dependence on fossil fuels. Securing access to key minerals such as lithium, cobalt, nickel and rare earth metals is critical for building resilient and indigenous supply chains for clean energy technologies.

About Rare Earth Metals:

• They are a set of 17 metallic elements including the fifteen lanthanides plus scandium and yttrium that show similar physical and chemical properties to the lanthanides.
• They are called ‘rare earth’ because earlier it was difficult to extract them from their oxides forms technologically. They occur in many minerals but typically in low concentrations to be refined in an economical manner.
• The 17 Rare Earth Metals are cerium (Ce), dysprosium (Dy), erbium (Er), europium (Eu), gadolinium (Gd), holmium (Ho), lanthanum (La), lutetium (Lu), neodymium (Nd), praseodymium (Pr), promethium (Pm), samarium (Sm), scandium (Sc), terbium (Tb), thulium (Tm), ytterbium (Yb), and yttrium (Y).
• These minerals have unique magnetic, luminescent, and electrochemical properties and thus are used in many modern technologies, including consumer electronics, computers and networks, communications, health care, national defense, etc.

A Challenging task ahead:

• Imported inflationary pressures through exposure to volatile oil and gas markets also pose risks to macroeconomic growth and stability, particularly for India, import-dependent for around 85% of its oil and half of its gas needs.
• We face several challenges in being self-reliant on key minerals and REM:
  • Reserves are often concentrated in regions that are geopolitically sensitive or fare poorly from an ease of doing business perspective.
  • A portion of existing production is controlled by geostrategic competitors.
  • For example, China wields considerable influence in cobalt mining in the Democratic Republic of Congo through direct equity investments and its Belt and Road Initiative.
• Future mine production is often tied up in offtake agreements, in advance, by buyers from other countries to cater to upcoming demand.
• As a first step towards the sourcing of strategic minerals, the Indian government established Khanij Bidesh India Limited (KABIL) in 2019 with the mandate to secure mineral supply for the domestic market.
  • Based on a CEEW study, here are suggestions that policymakers could consider to further this objective.

Future Prospects:

• First, figure out the mineral requirements of the domestic industry.
  • This could best be accomplished by a task force which includes the ministries of power, new and renewable energy, heavy industry, and science and technology.
  • Further, assess the technology mix that would support this deployment. On this basis, determine the quantities of minerals necessary to support indigenous manufacturing.
• Second, coordinate with the domestic industry to determine where strategic interventions by the government would be necessary for the purpose.
  • KABIL could collaborate with industry to bolster its market intelligence capabilities for tracking global supply-side developments.
• Third, if conducive investments opportunities don’t exist, KABIL should pre-emptively sign offtake agreements with global mineral suppliers to secure future production.
  • It could aggregate a reliable supply of minerals for domestic requirements and sign back-to-back sales agreements with the domestic industry.
• Fourth, the government should jointly invest in mining assets with geostrategic partners. KABIL should make equity investments in mining jurisdictions that private sector investors may deem too risky.
  • It should leverage government-to-government partnerships to mitigate investment risks. This could be done through joint investments with sovereign entities from geostrategic partners or private sector entities with expertise in specific geographies.
  • The External Affairs Ministry could initiate conversations with partner countries. Establishing resilient clean energy supply chains is a priority for the Quad, for instance.
• Fifth, support technologies that utilise domestically available materials. The deployment of technologies such as sodium-ion batteries could reduce requirements for sourcing minerals from beyond India’s borders.
  • While the current performance-linked incentive scheme on batteries is technologically agnostic, India could consider creating a tranche of capital to incentivise investments in technologies that rely on local raw materials.

Way Forward:

• Apart from above suggestions, developing policies on urban mining aimed at recycling mineral inputs from deployments that have completed their useful life could help further reduce dependence on international sourcing.
• Besides Ukraine, other potential geopolitical flashpoints also exist against a backdrop of dwindling multilateral cooperation. India must act immediately and decisively to mitigate these risks to its energy security.

Source: The Hindu

Previous Year Question

Q.1) With reference to the management of minor minerals in India, consider the following statements:

1. Sand is a ‘minor mineral’ according to the prevailing law in the country.
2. State Governments have the power to grant mining leases of minor minerals, but the powers regarding the formation of rules related to the grant of minor minerals lie with the Central Government.
3. State Governments have the power to frame rules to prevent illegal mining of minor minerals.

Which of the statements given above is / are correct?

1. 1 and 3 only
2. 2 and 3 only
3. 3 only
4. 1, 2 and 3