Zero-duty on critical minerals to supercharge India's energy transition

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Budget 2024-25 initiatives on critical minerals are set to play a pivotal role in securing minerals to achieve India's ambitious 500 giga-watt (GW) non-fossil fuel energy target.

India proposed waiving customs duty on 25 critical minerals, a move that could prove to be a game-changer for its clean energy sector. Important minerals proposed for zero import duty include Lithium, Copper, Nickel, Rare Earth Elements, Vanadium, etc among others, which play a key role in energy storage, powering electric vehicles, wind turbines, and solar panels.

As of December 2023, India had a 5–10 percent custom duty on critical minerals, according to reports.

"Rationalization of customs duty on minerals such as copper, lithium, cobalt, and rare earth elements can significantly debottleneck the supply chain for the energy transition sector and encourage domestic manufacturing of renewables, batteries, electrolyzer, and other electrical equipment," said Amit Bhargava, Partner & National Head - Mining & Metals, KPMG in India.

The move also underscores India's commitment to the G20 goals of developing reliable, diversified, sustainable, and responsible supply chains for critical minerals.

While the investments in critical minerals mining shot up globally by 10% last year, its availability remained a challenge for developing nations like India, which almost entirely relies on imports for few of these minerals. This caused, India to actively pursue international collaborations and announce partnerships with mineral-rich countries like Australia, to strengthen its supply chain.

In the budget speech, the government also announced a critical mineral mission for domestic exploration, recycling of minerals, and overseas acquisition of critical mineral assets.

The mission's mandate will include technology upgrades, the development of a skilled workforce, and an extended producer responsibility framework for suitable financing,  Sitharaman said in her Union Budget speech on June 23.

"Indigenising and overseas acquisition of mining and building domestic capabilities to process and recycle will secure the supply chain for the domestic manufacturing ecosystem, especially for clean energy sectors such as solar, wind, EV and batteries," said the Council on Energy, Environment and Water (CEEW).

As of now, China is the dominant player in global mineral processing, holding 70 to 90 percent of the world's processing capabilities.  The government's Economic Survey 2023-24  report also flagged concerns regarding dependence on China for critical minerals.

"This mission will help accelerate technology tie-ups and joint venture partnerships, which are essential for developing the processing part of the critical minerals value chain, the majority of which today sits in China," said Rakesh Surana, Partner, Deloitte.

Reportedly, the government is talking to the United Kingdom, South Korea, and Australia about collaborations in processing technology.