Critical Minerals and India’s EV Transition

Why in News?

India sold over 2 million Electric Vehicles (EVs) in 2024, registering a 27% year-on-year growth, driven by initiatives such as FAME-I, FAME-II, PM E-DRIVE, and the Automotive PLI Scheme. With the target of achieving 30% EV penetration by 2030, India's battery market is expected to reach ₹25.05 trillion (US$300 billion).

However, this transition depends heavily on critical minerals like lithium, cobalt, nickel, and graphite, making India vulnerable to external supply chains, especially China.

What are Critical Minerals?

• Critical minerals are minerals that are essential for economic development, national security, clean energy technologies, defence, and advanced manufacturing, but whose supply is vulnerable due to limited domestic availability or concentrated global production.

• These minerals form the backbone of EV batteries, renewable energy systems, semiconductors, aerospace, and defence equipment.

• For India, the most important critical minerals include Lithium, Cobalt, Nickel, Graphite, Rare Earth Elements (REEs), Copper, and Manganese.

Growing Demand for Critical Minerals

Rapid Expansion of Battery Market

India's lithium-ion battery market is projected to increase from 10.8 GWh in 2022 to 160.3 GWh by 2030, reflecting the rapid expansion of electric mobility and renewable energy storage.

According to NITI Aayog, producing 100 GWh of batteries annually would require nearly 193,000 tonnes of cathode active material, 98,000 tonnes of anode active material, along with significant quantities of lithium, copper, aluminium, and graphite.

Rising Import Dependence

NITI Aayog's 2026 assessment estimates that under a Net Zero scenario, India's demand for critical minerals will be 51% higher than under current policies. Consequently, the country's critical mineral import bill has already increased from US$3.03 billion (2020-21) to US$8.01 billion (2023-24), widening the trade deficit.

The China Factor

Heavy Import Dependence

India is 100% import-dependent for lithium, cobalt, and nickel, imports more than 90% of its copper requirements, and about 60% of natural graphite.

China supplies over 80% of India's lithium imports and dominates the processing of cobalt, nickel, and graphite, making India's clean energy transition strategically vulnerable.

China's Global Dominance

China controls nearly 90% of global rare earth processing, 68% of nickel refining, 65% of lithium chemical processing, and 74% of cobalt refining. Even minerals mined in countries like Australia, Argentina, Congo, and Indonesia often require processing in China before reaching global markets.

China has also established an integrated value chain, covering mining, refining, battery manufacturing, and recycling, while investing heavily in mineral-rich countries such as Congo, Indonesia, Argentina, and Peru.

Geopolitical Risks

Critical mineral supply chains have increasingly become tools of geopolitical leverage, as demonstrated by China's restrictions on rare earth exports to Japan in 2010. Similar disruptions could significantly impact India's EV and renewable energy sectors.

Challenges Before India

Limited Domestic Resources

Although India possesses abundant reserves of iron, manganese, aluminium, and copper, it has only inferred lithium resources of about 5.9 million tonnes in Jammu & Kashmir, while commercially viable reserves of cobalt, nickel, and battery-grade graphite remain negligible.

Weak Processing Capacity

India has only recently commissioned its first battery-grade lithium refinery with a capacity of 1,000 tonnes per annum, while cathode and anode manufacturing is still largely confined to pilot projects.

Regulatory Bottlenecks

Exploration has traditionally been dominated by public sector agencies, with limited private participation. Multiple environmental clearances, Coastal Regulation Zone (CRZ) restrictions on monazite-bearing sands, and regulatory complexities continue to delay mining projects.

Financing Constraints

Midstream activities such as mineral refining, battery material production, and recycling require substantial capital investment, long gestation periods, and face volatile global commodity prices, discouraging private investment.

Government Initiatives

Demand Creation

The Government has promoted EV adoption through FAME-I, FAME-II, and the recently launched PM E-DRIVE Scheme, which has an outlay of ₹10,900 crore to expand electric buses, two-wheelers, and charging infrastructure.

National Critical Minerals Mission (NCMM)

The National Critical Minerals Mission (NCMM) is a ₹34,300 crore initiative covering FY 2024-25 to 2030-31, aimed at achieving self-reliance in 30 critical minerals, including lithium, cobalt, nickel, and rare earth elements.

The mission focuses on domestic exploration, overseas acquisition of mineral assets, technology development, and mineral recycling.

Production Linked Incentive (PLI) Scheme

The ₹25,938 crore PLI Scheme for the automobile sector provides incentives ranging from 8% to 18% for manufacturing EVs, hydrogen fuel cell vehicles, and their critical components, thereby strengthening India's domestic EV ecosystem.

International Partnerships

India has entered into lithium exploration agreements with Argentina, critical mineral partnerships with Australia, and actively participates in the Minerals Security Partnership (MSP), Quad Critical and Emerging Technologies Working Group, and the India-EU Trade and Technology Council.

Way Forward

Securing Raw Material Supply

India must accelerate domestic exploration by simplifying environmental clearances and encouraging private investment. Simultaneously, it should expand overseas acquisition of mineral assets through strategic partnerships in Argentina, Australia, Africa, and Latin America.

Developing Domestic Processing Capacity

India needs to establish advanced refining and processing facilities through technology partnerships with Japan, South Korea, and the European Union, thereby reducing dependence on Chinese processing infrastructure.

Promoting Alternative Battery Technologies

Investment in sodium-ion batteries, solid-state batteries, and other alternative chemistries should be increased, as these technologies depend less on scarce critical minerals.

Building a Circular Economy

India should develop a robust battery recycling ecosystem under Extended Producer Responsibility (EPR) to recover lithium, cobalt, nickel, and graphite from used EV batteries through urban mining.

Creating a Supportive Financial Ecosystem

Establishing a National Critical Minerals Fund with blended finance, viability gap funding, and political risk insurance would attract long-term private investment into exploration and refining.

Conclusion

India's transition towards clean mobility is not merely an environmental objective but also a matter of economic security and strategic autonomy. Achieving the ambitious target of 30% EV penetration by 2030 requires securing reliable supplies of critical minerals, developing domestic refining and manufacturing capacity, strengthening battery recycling, and diversifying supply chains beyond China.