Why in News?

• The Union Cabinet has approved the Critical Mineral Processing Scheme - a ₹2,814-crore Capital Expenditure (Capex) Support Scheme to develop domestic processing capacity for critical minerals, particularly lithium and nickel.
• The initiative seeks to address India's dependence on imported refined materials, reduce strategic vulnerability arising from China's dominance and strengthen the domestic critical mineral value chain.

What’s in Today’s Article?

• Key Features of the Scheme
• Significance of the Scheme
• Critical Mineral Processing Parks
• Complementary Government Initiatives
• Way Forward
• Conclusion

Key Features of the Scheme:

• Financial assistance and capacity targets:
  • Total outlay: ₹2,814 crore.
  • Duration: Five years, from FY 2026-27 to FY 2030-31.
  • Capital subsidy: 30% of eligible capital investment.
  • Processing facilities: Four plants — two for lithium and two for nickel.
  • Capacity and financial support: For Lithium, minimum capacity per plant will be 30,000 tonnes, while maximum capital support per beneficiary will be ₹500 crore (Nickel - 50,000 tonnes, ₹900 crore).
• Selection and disbursement:
  • Beneficiaries will be selected through a two-stage process: technical qualification followed by financial bidding.
  • Two beneficiaries will be selected for each mineral based on the least-cost criterion, prioritising bidders seeking the lowest government support.
  • Incentives will be disbursed in three tranches linked to the achievement of specified milestones.
• Processing objectives: The scheme aims to convert lithium and nickel ores and intermediate products into high-purity compounds. Nickel processing is also expected to facilitate the recovery of cobalt as a by-product.
• Industry perspective:
  • Industry stakeholders have welcomed the scheme as a significant step towards addressing India's processing-capacity gap.
  • For example, Attero emphasised that domestic processing is as important as securing access to mineral resources.

Significance of the Scheme:

• Reducing import dependence:
  • India has limited domestic processing capacity and relies heavily on imports of refined critical minerals, including lithium, nickel, cobalt, rare earth elements (REEs) and silicon.
  • The scheme will -
    • Promote domestic beneficiation and processing infrastructure.
    • Reduce dependence on imported refined intermediates and high-purity materials.
    • Enhance domestic value addition and strengthen supply chain resilience.
• Addressing China’s strategic dominance:
• China controls approximately 90% of global critical mineral processing capacity and can use this dominance as leverage during trade tensions.
• India's limited processing capabilities expose it to supply disruptions, price volatility and geopolitical risks.
• Developing indigenous processing capacity is essential for economic security, technological self-reliance and strategic autonomy.
• Supporting strategic industries: Domestic processing facilities are expected to strengthen mineral supplies for -
  • Electric mobility and electric vehicle batteries.
  • Battery Energy Storage Systems (BESS).
  • Electronics and semiconductor-related industries.
  • Defence and speciality steel.
  • Chemicals, catalysts and pharmaceuticals.
• Overcoming structural challenges:
  • India's commercial-scale processing projects face several constraints -
    • High capital investment requirements.
    • Limited availability of suitable processing technologies.
    • Constrained access to raw materials.
    • Nascent domestic beneficiation and processing infrastructure.
  • The capital subsidy seeks to reduce investment risks and encourage private-sector participation.

Critical Mineral Processing Parks:

• The government is developing mineral-specific processing parks in four states to establish integrated ecosystems.
• Gujarat: Availability of heavy REEs and existing processing capabilities.
• Andhra Pradesh: Development of a rare earth corridor.
• Maharashtra: Proposed lithium processing ecosystem.
• Odisha: Domestic nickel reserves and access to imported nickel from Indonesia and other countries.
• The parks aim to integrate mineral processing, infrastructure and associated industrial activities.

Complementary Government Initiatives:

• National Critical Minerals Mission (NCMM):
  • It seeks to strengthen India's critical mineral supply chain through exploration, mining, processing, recycling and international partnerships.
  • It proposes a National Critical Mineral Stockpile Programme to maintain strategic reserves and protect against supply disruptions.
• National Critical Mineral Stockpile Programme:
  • Allocation: ₹500 crore for the development of reserves.
  • Mission period: 2024-25 to 2030-31.
  • Objective: Ensure uninterrupted availability of critical and strategic minerals during supply shocks.
• Critical Mineral Recycling:
  • The processing scheme complements existing government support for recycling critical minerals from used batteries and electronic waste.
  • Together, primary mineral processing and recycling can create a more dependable domestic supply chain.

Way Forward:

• India must combine capital incentives with technology development, reliable raw-material access, skilled manpower, sustainable processing practices and international mineral partnerships.
• Developing domestic processing capacity alongside recycling and strategic stockpiling will be crucial to reducing import dependence and ensuring long-term supply chain security.

Conclusion: The scheme represents an important step towards transforming India from a predominantly import-dependent consumer of critical mineral compounds into a competitive domestic processing and value-addition hub.