• India is looking to increase its share of manufacturing from 16% to 24% by 2030 which will create major shortage in supply of minerals required in manufacturing.
• To deal with the growing demand of minerals, India should expand mineral production through reforms aimed at grabbing opportunities.

Requirement to expand mineral production

Electric Vehicle (EV)

• India’s EV sales will increase rapidly for the rest of this decade.
• It increases the demand for lithium, cobalt, nickel and graphite.
• It also increases the demand of iron ore in the form of steel, bauxite as a source of aluminium and copper which are necessary to build a vehicle.
• EV requires six times more mineral input than a conventional car.

Solar and Wind Energy

• India’s target for non-fossil energy capacity is 500GW by 2030.
• It will be largely dependent on solar and wind energy.
• Onshore wind requires nine times more minerals than a gas-fired power plant.
• It needs rare earth elements (REE), zinc, copper and aluminium.
• Solar PV panel requires nearly thrice more minerals than a coal-fired plant of the same capacity.
• It needs aluminium and copper.

Global Electronics Hub

• India is aspired to become global electronic hub and, in that endeavour, minerals play crucial role.
• Example:
• 13 minerals are used in a mobile handset.
• 46 are needed for each iPhone.
• 28 are needed for smart TV.

Housing, Infrastructure and Transportation

• It will boost the demand of for iron ore, bauxite, copper, limestone, chromium, zinc, etc.
• Rapid industrialization will double the demands of these minerals by 2030.

Food security

• It is mainly dependent on rock phosphate and zinc as agricultural inputs.

Issues and Way forward

Expenditure on Exploration

• Expenditure on Exploration is required to meet rapidly growing demand.
• Mineral value chain starts with exploration.
• India’s expenditure on exploration, particularly for deep-seated minerals like copper, zinc, lead, gold, silver, etc, has been abysmally low.
• Solution: To encourage exploration, India should shift from the current ‘revenue maximizing’ model to an ‘exploration investment incentivizing’ model.
• Benefit: It can attract smaller explorers to India that have contributed well to the development of the mineral sector in Canada, Australia, South Africa and the US.

 Ownership of mining lease

• Mines and Mineral (Development and Regulation) Act, 1957 does not let a miner own a mining lease beyond 10 sq km in area for a mineral in a state.
• Although that limit has been expanded by some states.
• Ministry of mines has recently propos to reduce the area limit.
• This will stop major companies from participating in future auctions, thus denying India the benefits of scale and global competitiveness that a liberal policy could deliver.
• Solution: There should be no limits on bids to acquire block in auction regime.
• Such restriction should be removed.

Double Taxation

• It is imposed on minerals like iron ore and bauxite in the form of royalty on royalty.
• Royalty is payable on the average sale price (ASP) and the law does not allow any deduction of royalty from it.
• Therefor mineral users end up paying royalty on royalty, which dents their cost competitiveness.
• Solution: Law must exclude royalty and other charges from the sale value to determine the ASP.

Uniform(ex-mine) Average Sale Price (ASP) determination

• Currently there’s differential treatment across minerals for calculating ASP.
• Example: Bauxite is the only bulk mineral whose ASP is determined from the selling price of the end product, aluminium.
• Law determines the ASP of bauxite as ex-plant, while it is an ex-mine calculation for all minerals.
• As a result, the derived ASP of bauxite is often 3-4 times the actual market price, hindering any large-scale auction of metallurgical grade bauxite.
• Solution: It is required to have ASP determination of all minerals on the basis of ex-mine.

Private participation

• In the mining of critical minerals that have important non-atomic uses, like rare earth elements, lithium, titanium, niobium, etc, private participation should be allowed.
• These non-fissile minerals should be deleted from Part B of the first schedule of the Mines and Minerals (Development and Regulation) Act, 1957, which is meant for atomic minerals.

Lack of exploration and mining

• India’s import bill for minerals and metals touch $157 billion in 2021-22.
• It is just about a fourth of total imports.

India has potential to become a global hub for manufacturing, especially in minerals and metals, due to domestic demand and interest from global manufacturers to relocate to India. In this regard, the government needs to implement policies supporting infrastructure development, offer incentives for businesses to invest in the country, and ensure a skilled workforce to support industry growth.