India faces domestic, global hurdles in unlocking critical minerals potential: experts

India must overcome tepid domestic interest and low international awareness of its critical minerals potential to achieve the government's aim of reducing its heavy import vulnerability, market experts told Platts, part of S&P Global Energy, in the week to Dec. 12.

India is largely self-sufficient in iron ore, accounting for 10.38% of global production in 2024, when it also produced 7.38% of the world's zinc and 5.30% of lead, according to S&P Global Market Intelligence data. It is also the world's second-largest aluminum producer, according to the government.

While the government has recognized that its huge electric vehicle and renewable energy buildout will require international partnerships to source the other minerals it needs, it also intends to cut import dependence long term.

On Nov. 12, India's government announced a move to an ad valorem royalty regime for cesium, rubidium, graphite, and zirconium. The latter two are on its critical minerals list adopted in 2023, when the country also joined the US-led Minerals Security Partnership. India also hopes to unlock associated critical minerals found with them, like lithium, tungsten, rare earths, and niobium, among others.

The royalties restructure was "the latest in a slew of measures to rehaul its domestic mining industry, including sectoral reforms, production-linked incentives, and skill development measures for the mining sector," Titiksha Vashist, co-founder and lead researcher at New Delhi-based thinktank The Pranava Institute, told Platts.

"India's shift towards an ad valorem royalties regime also seeks to address tepid response to auctions of critical minerals blocks from domestic players, and aims to incentivize bids in upcoming auctions," Vashist said.

However, India was absent among the 82 jurisdictions in the Fraser Institute's latest annual global survey of mining and exploration companies. Published in July, the report did not evaluate its investment attractiveness as the institute received fewer than five responses for the country.

"This is indicative of a general lack of experience in working in India and a lack of awareness of the investment attractiveness of India in the global mining investment community," David Whittle, national industry group leader for critical minerals at the Australia India Chamber of Commerce, told Platts.

"That may be a greater issue for India to deal with than the royalty regime, if its objective is to attract international investment."

India's larger goals

The royalties move should be understood in light of the larger goals set by the Narendra Modi government to develop domestic capability, not just in critical mineral mining but also in processing, to curb imports and build supply chain resilience, Vashist said.

"The ecosystem reforms seek to incentivize companies in the short- and medium term and boost investor confidence in India's critical minerals sector, with high domestic demand from the clean energy sector in particular," Vashist said.

As most critical minerals markets are small, thin, opaque and subject to significant sovereign interference, miners are seeking to reduce that risk by seeking offtake agreements with some type of price assurance, Whittle said. Within that context, India changing the royalty rate calculation mechanism for graphite from a per-metric-ton basis to ad valorem basis will aid investment, he added.

"A fixed per-ton royalty provides the government with a steady income but amplifies the downside and upside risk for miners," Whittle said. "It operates as a fixed cost for a given production level, whereas the ad valorem royalty flexes with community price, dampening the worst effects of lower prices, with the tradeoff that it also reduces the upside for miners associated with high prices."

Need for institutional framework

India still "lacks a strong institutional framework," Sudam Behera, head of mines at Indian integrated iron and steel products manufacturer Rashmi Group, told Platts.

Behera believes the government should focus policy incentives on lithium, graphite, nickel, cobalt, vanadium, copper and rare earths in 2026, with fast-tracking of regulatory approvals and improving fiscal clarity needed for investment.

While securing strategic overseas assets and supply partnerships are still essential, the government should also narrow down its list of immediate priority minerals for industrial policy, Behera said. Its 2023 list included 30 critical minerals.

India's critical minerals strength lies in more exploration in the states of Madhya Pradesh, Andhra Pradesh, Karnataka, Bihar, and Odisha, Behera said.

The country also needs to build domestic processing and refining capacity along with national recycling and urban mining at scale, he added.

India's mines ministry did not immediately respond to a request for comment.