China’s moves must recast India’s critical minerals push

Context: On January 2, 2025, China’s Ministry of Commerce (MOFCOM) expanded its
export control list by including 28 entities from the United States,
effectively restricting their access to a swath of items classified under
dual-use export controls. Beijing’s list encompasses tungsten, gallium,
magnesium, beryllium, hafnium, lithium-6 (isotope), and others — minerals with
uses ranging from chip production to speciality alloys. India’s push for critical minerals development has
faced stubborn challenges. In 2023, lithium deposits that were found in Jammu
and Kashmir’s Reasi district made headlines, hinting at a game-changer moment
for India’s energy transition.

Key points

·       Overview: The growing
geopolitical competition for critical minerals, a situation that directly
impacts countries like India, which remains heavily reliant on imports for
these essential materials. The situation underscores India’s need to strengthen
domestic mineral exploration and production capacities.

·       China’s
Strategic Mineral Export Controls: Targeted Minerals -
China’s export control targets critical minerals such as tungsten, gallium,
lithium, and magnesium, vital for industries like semiconductors and batteries.

Weaponization of
Minerals - This is not the first instance of China using mineral exports as
leverage, seen previously in the 2010 rare earths embargo against Japan.

Strategic
Calculations - China balances its restrictions carefully, avoiding impacts on its own
industries and the global supply of minerals heavily reliant on Western
imports.

·       India’s
Mineral Diplomacy and Exploration Efforts: Current Dependence -
India continues to rely heavily on imports for critical minerals, such as
lithium, cobalt, and rare earth elements, vital for its energy transition and
technology manufacturing.

Policy Initiatives
-
The Indian government has introduced reforms such as the Mines and Minerals
Amendment Act 2023 and set up KABIL to secure overseas mineral investments,
aiming to diversify supply sources.

Challenges in
Exploration - Despite these reforms, domestic exploration remains sluggish, with
insufficient foreign participation and challenges in the classification and
commercial viability of mineral blocks.

·       India’s
Mineral Exploration and Market Participation: Outdated Classification
System - India’s outdated resource classification system leaves many
auctioned mineral blocks in early exploration stages, deterring investment.

Low Demand for
Exploration Licenses - Despite reforms, the demand for exploration
licenses remains low, reflecting the risk perception and lack of interest from
private and foreign investors.

Need for Fiscal
Incentives - Offering larger upfront fiscal incentives for exploration could mitigate
the risks, encouraging both domestic and foreign participation in mineral
extraction projects.