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

China’s Export Control of Critical Minerals

• China’s Ministry of Commerce expanded its export control list to include 28 entities from the US, restricting access to certain items classified under dual-use export controls.

• The list includes minerals and rare and refined materials vital for high-tech applications such as aerospace, semiconductors, batteries, and advanced electronics.

• China’s approach is strategic and calculated, targeting minerals deemed critical by western nations and their allies, especially those essential for semiconductors, batteries, and high-tech manufacturing.

• The country avoids controlling minerals heavily dependent on western raw material imports and refrains from actions that could disrupt its domestic industrial enterprises or export-dependent sectors.

India’s Challenges in Critical Mineral Development

• India’s push for critical minerals development has faced challenges, with only 48% of the mineral blocks available for auction in recent years having been auctioned.

• The Union government has introduced measures to spur activity in critical minerals, including the introduction of an ‘exploration license’ and promises to reimburse 50% of the exploration expenditure once mining begins.

• Despite these reforms, only a handful of exploration licenses for minerals such as lithium, rare earth elements, and graphite have been cleared, mostly going to Indian public sector firms.

• The outdated resource classification system and low demand for exploration licenses have led to suboptimal auctions and potential overlooking of valuable blocks.

• A possible remedy is to offer larger upfront fiscal incentives during the exploration phase, similar to chip manufacturing, offsetting immediate exploration costs instead of reimbursing them only after production begins.