Interim Budget: Critical minerals supply chain security takes prominence

In the Budget speech for the financial year 2025 (FY25), Union Finance Minister Nirmala Sitharaman highlighted the evolving global landscape, marked by increasing complexity and challenges. Against the backdrop of wars, conflicts, and geopolitical shifts, she emphasised the significant role of critical minerals in shaping the new world order post-Covid pandemic.

“Geopolitically, global affairs are becoming more complex and challenging with wars and conflicts. Globalisation is being redefined with reshoring and friend-shoring, disruption and fragmentation of supply chains, and competition for critical minerals and technologies. A new world order is emerging after the Covid pandemic,” the Finance Minister said.

In her Budget speech, the Finance Minister's emphasis on critical minerals signals a government commitment to achieving self-reliance in the supply of minerals crucial for cutting-edge technology. This marks the first instance of critical minerals receiving significant attention in the Union Budget. Notably, the Union government unveiled its inaugural critical minerals list on June 28, outlining 30 essential minerals pivotal for the nation's economic growth and technological advancement.

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Addressing the imperative of mining these critical minerals, the government also amended both the Mines and Minerals (Development and Regulation) Act, 1957, and the Offshore Areas Mineral (Development and Regulation) Act, 2002. This legislative move underscores the administration's proactive approach to securing a stable and self-sufficient supply chain for critical minerals, aligning with its broader vision for technological and economic independence.

On November 29, the government took a significant step by commencing the auction process for 20 blocks containing critical minerals. Notably, this includes the 5.9-million-tonne lithium reserves uncovered in Jammu & Kashmir's Reasi district. The collective value of these blocks has been estimated by the government at Rs 45,000 crore.

Furthermore, in her address, the Finance Minister highlighted the ongoing transformation of globalisation, marked by strategies such as reshoring and friend-shoring. This underscores the evolving dynamics in international affairs, emphasising the need for nations to strategically position themselves in the changing landscape of resource dependencies.

Governments worldwide are proactively involved in diplomatic engagements and alliance-building to fortify their resource security amid emerging challenges. The Finance Minister's call to action underscores India's imperative participation in the global competition for critical minerals.

India, in pursuit of securing a robust global supply chain, has recently joined the US-led Mineral Security Partnership, marking its second such alliance last year. In April, an unprecedented collaboration saw the Indian and Australian governments jointly investing $3 million each in five critical mineral exploration projects in Australia.

In mid-2020, India, through Khanij Bidesh India Limited, a joint venture of three public sector undertakings — National Aluminium Company, Hindustan Copper Limited, and Mineral Exploration Company Limited — signed an agreement with an Argentinian firm to jointly prospect lithium. Besides this, it is also exploring options in Chile and Bolivia.

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On January 16, 2024, the Centre furthered its commitment by signing an agreement for the acquisition of five lithium brine blocks in Argentina. The deal, inked between Khanij Bidesh India Ltd (KABIL) and Catamarca Minera Y Energética Sociedad Del Estado (CAMYEN), a state-owned company in Catamarca, Argentina, emphasises India's proactive approach to exploration and development.

As India intensifies its efforts in strengthening the critical minerals supply chain, there is speculation about potential collaboration with the European Union's Critical Raw Materials (CRMs) Club. This move would signify India’s ongoing commitment to ensuring a stable and diverse source of critical minerals for its growing technological and economic needs.