Mineral riches spur India’s outreach

RARE earths are in the spotlight as China’s export curbs on these elements have disrupted output in a wide range of global industries. Automotive, electronics, defence, aerospace and renewable energy sectors have been hit as these minerals are essential for manufacturing critical components. India is facing this situation along with other countries, with the prospect of a slowdown looming large in the electric vehicle (EV) and automobile industries.

The problem began in April when China’s export restrictions came into force in response to the Donald Trump administration’s threat of imposing high import tariffs. While the main target may have been the US, countries like India had to face red tape in sourcing these minerals, especially rare earth magnets needed for the EV industry. This prompted the belated recognition that such heavy reliance on China for minerals can have a crippling impact on industries in case supplies are cut off. It was the growing concern over this issue that evidently led to Prime Minister Narendra Modi’s warning at the BRICS summit in Rio that critical minerals must not be ‘weaponised’.

It is not just rare earths, however, but several other minerals which are essential for sunrise industries like semiconductors. These include lithium, copper, zinc and uranium. Fast-growing economies like India need them to produce equipment of all kinds. The realisation that sources for long-term supplies need to be tied up, like in the case of fossil fields, has prompted the latest round of resource-oriented diplomacy. The PM’s recent overseas tour took him to mineral-rich countries where investments could yield dividends.

It is no coincidence that the countries he toured earlier this month are rich in resources. The African leg covered Ghana and Namibia, which are well known for mineral deposits of all kinds. Despite China having made inroads in terms of influence and investments in Africa, these two nations have longstanding ties with India.

In the case of Ghana, the relationship goes back to the Non-Aligned Movement and the friendship between Jawaharlal Nehru and Kwame Nkrumah. Proposals for investments to develop mineral resources in collaboration with Indian companies are thus being viewed favourably. Among the West African country’s key mineral resources are gold, which is already a big import item, along with diamonds, bauxite and manganese. Even lithium reserves have been discovered there recently.

As for Namibia, the warm relationship goes back to the days of India’s support for its independence movement. The highlight of the visit, the third by an Indian PM, was collaboration in mineral exploration as well as digital financial infrastructure. Namibia can be a valuable ally in providing resources like uranium for India’s nuclear energy programme. It is also a major diamond producer, but the gems normally reach here through intermediaries. Direct trade, which will be mutually beneficial, is now being talked about.

The focus was on resources during the Latin American leg of the trip as well. The bonhomie witnessed in Argentina was based on an expanding economic relationship involving the development of mineral resources. Indian state-owned companies have already begun collaborating in exploration and mining of that country’s huge lithium reserves. Argentina forms part of what is known as the Lithium Triangle. Other members of this triad are Bolivia and Chile; the latter has the largest lithium reserves in the world.

India’s scramble to ensure that it has access to lithium in countries like Argentina is because of the pivotal role of this mineral in lithium-ion rechargeable batteries. These are an integral element of a wide array of consumer electronics, such as mobile phones, laptops and tablets. They are indispensable for the manufacture of EVs and medical devices as well as in renewable energy storage systems. Lithium is also needed in the aerospace and automotive industries.

Minerals were high on the agenda of the India-Brazil meetings in Rio following the BRICS summit. Plans were discussed for joint exploration, mining, processing, recycling and refining of minerals. Brazil has the world’s third largest reserves of rare earths. However, it has only recently begun mining, with commercial production having started from its first mine last year.

Rare earth elements, incidentally, are not termed such because reserves of these 17 minerals are difficult to locate. They are considered rare owing to their dispersed nature, which makes mining difficult and not economically viable at times. China has not imposed an explicit ban on exports to India, but some restrictions have been introduced for seven rare earth elements. Persistent delays in availability could have a serious impact in the coming days, especially as these minerals are used in a wide range of hi-tech industries.

The resource-linked diplomacy is thus a pragmatic attempt to ensure that the country’s development is not hampered at any stage by a shortage of these critical minerals. At the same time, it is high time India stepped up exploration and processing of minerals within its own borders. It has one of the largest reserves of rare earths — the fifth in the world at 6.9 million tonnes — but has done little in the way of exploitation of these resources. One reason has been difficulty in extraction as they are tied to radioactive minerals like thorium.

It is not too late to start the process. The National Critical Minerals Mission was launched this year with an outlay of Rs 36,000 crore over a seven-year period. It is aimed at ensuring self-reliance in critical minerals by raising investments in exploration, expanding domestic output and acquiring assets abroad. In the meantime, imports must be sourced from multiple suppliers to prevent disruption to industrial production. It is here that PM Modi’s Global South tour should help in making assured sources of supply available for immediate needs and in the long run.

Sushma Ramachandran is a senior financial journalist.

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