Whalesbook
Boosting Domestic Minerals Production Faces Reality Checks
India is set to implement a key policy to bolster domestic processing of critical minerals vital for its electric vehicle (EV) and battery sectors. Led by the Mines Ministry, this strategic move aims to reduce the nation's heavy reliance on imports for essential resources like Nickel and Lithium, which are fundamental to EV technology. Mines Secretary Piyush Goyal indicated the policy is in advanced stages, initially focusing on Nickel for high-end EVs and Lithium for battery production. This initiative underscores a national effort to strengthen supply chains amid a rapidly changing global market. However, establishing such a foundational industry faces complex challenges.
Key Challenges: Funding, Tech, and Global Competition
Developing a full processing value chain for these minerals presents major obstacles. Building robust refining capacities requires significant capital investment from both public sector undertakings (PSUs) and private companies. The path from mineral auction to actual production is very long. Globally, China dominates, processing 60-70% of many critical minerals and holding substantial sway over the market. This concentration gives it significant geopolitical and economic influence, as seen in its recent export controls on graphite and rare earths.
The policy aims to simplify processes, but significant technological barriers exist, particularly in extracting value from the 'black mass' residue of spent lithium-ion batteries. While recycling offers a way to reduce import dependency, the advanced processing capabilities required are scarce and often held by a few global companies. Recovering lithium from black mass, for instance, is technically harder than recovering nickel, cobalt, or copper using current methods. Global forecasts suggest recycling could supply 15% of critical minerals by 2035, more than double the current rate, highlighting India's potential opportunity if these technology gaps are closed.
EV Market Growth Fuels Demand Amid Global Scramble
The Indian EV market is expected to grow substantially, with its size anticipated to reach USD 31.09 billion by 2026, growing significantly at a CAGR of 52.56% until 2035. This surge in demand for EVs directly drives the need for critical minerals. Lithium carbonate prices have rebounded sharply in early 2026, trading around USD 22,970 per metric ton by April, driven by an anticipated supply deficit. Forecasts project a deficit of 22,000 to 80,000 metric tons in 2026. Meanwhile, nickel prices have been more volatile, trading between USD 16,000 to USD 18,000 per tonne in early 2026. This volatility is influenced by Indonesian supply quotas and softening demand from battery and stainless steel sectors, though supported by supply controls. Goldman Sachs forecasts an average of USD 17,200 per tonne for nickel in 2026.
Globally, the US and EU are increasing efforts to challenge China's dominance by backing private firms with equity stakes and financing, trying to diversify supply chains and establish domestic processing and recycling capacities. India's strategy includes bolstering domestic production and pursuing international partnerships, such as memorandums of understanding (MoUs) with resource-rich nations. Recent government budget measures focus on rare earth permanent magnet corridors and import duty exemptions for processing critical minerals, aiming to speed up this value chain development. However, India faces long mine development times, averaging 18 years.
Major Risks: Execution Hurdles and Import Dependence
Despite policy progress and the vital importance of minerals like Lithium, Cobalt, and Nickel for India's EV goals, major risks remain. India's 100% import reliance for critical minerals, including Lithium, Cobalt, and Nickel, leaves it highly exposed to global supply issues and price swings. While India has discovered lithium reserves in Jammu and Kashmir, commercial production is years off. Furthermore, depending on foreign countries for raw materials through MoUs brings geopolitical risks.
The technological gap, especially in efficient 'black mass' recycling, is a major weak spot. While recycling is offered as a solution, the necessary advanced technologies are scarce and largely controlled by a few entities, potentially creating new dependencies. China's entrenched position in processing, handling 60-70% of critical minerals, presents tough competition. The huge capital needed for developing mining, extraction, and refining infrastructure, coupled with the lengthy 'auction to production' timelines, makes execution difficult. Previous reforms under the Mines and Minerals (Development and Regulation) Act aimed to boost private investment but face structural and regulatory hurdles.
The Road Ahead: A Long Path to Self-Reliance
Analysts see India's critical minerals policy as a necessary step towards energy independence and industrial growth, but its success depends on overcoming major challenges. Ambitious targets for EV penetration by 2030 require secure mineral access. The National Critical Mineral Mission (NCMM) aims to fix these issues by supporting domestic exploration, processing, and recycling, backed by substantial government and PSU investment. Turning policy into reality will require sustained capital infusion, rapid technological development, and strategic international collaborations. Becoming a major player in the critical minerals value chain will be a long process requiring careful execution and adaptation to dynamic global market conditions.