The Union Cabinet has approved a new capital support scheme offering a 30% subsidy to build lithium and nickel processing plants. The policy aims to reduce India's import reliance on minerals critical for EVs and high-tech manufacturing. Companies will be selected through a competitive bidding process for projects, with individual support capped at up to ₹900 crore.
The Union Cabinet has officially approved the 'Capex Support Scheme to Promote Critical Mineral Processing,' earmarking ₹2,814 crore to encourage private players to build domestic refining capabilities. This five-year initiative, running from FY27 to FY31, is designed to transform India into a value-added manufacturing hub for essential minerals that are currently imported in large volumes.
Under this new policy, the government will provide a 30% capital subsidy on eligible investments. The scheme specifically targets the establishment of four processing plants—two for lithium, each with a minimum capacity of 30,000 tonnes, and two for nickel, each with a minimum capacity of 50,000 tonnes. Financial support is structured to cap at ₹500 crore per lithium project and ₹900 crore per nickel project, aiming to offset the heavy costs associated with setting up such complex infrastructure.
The government intends to use a two-stage bidding process to select beneficiaries, focusing on technical qualification followed by a least-cost financial bid. By incentivizing domestic processing, the policy seeks to secure supply chains for industries such as electric vehicles, electronics, and defense, which currently rely heavily on overseas raw materials.
While the financial support is a significant policy shift, investors and industry watchers may note that building high-purity mineral processing plants carries inherent risks. The capital spending required to construct these facilities remains high, even with a 30% subsidy. Furthermore, companies entering this space must manage the technical challenges of setting up large-scale refining operations, which are currently nascent in India.
Another critical factor for the success of these projects is the security of raw material supplies. Since India is not a major producer of lithium or nickel ores, processing companies will likely remain dependent on imported ore or concentrate. Fluctuations in global mineral prices and potential geopolitical shifts could affect the long-term feasibility of these projects. The final impact on the balance sheets of participating companies will depend on their ability to execute these large projects within the stated timelines while managing raw material procurement and production costs effectively.