Building resilient mineral supply chains – Energy security | 11th October 2022 | UPSC Daily Editorial Analysis

What is the article about?

• Challenges and suggestions to build resilient mineral supply chains to ensure energy security for India.

Relevance: GS3: Infrastructure: Energy

Context:

• In his Independence Day address, Prime Minister Narendra Modi exhorted the country to pursue aatmanirbharta in energy by focusing on clean energy technologies.
• The fragility of clean energy supply chains obscures pathways for countries to reduce dependence on fossil fuels.

Challenges to build resilient mineral supply chains:

• First, reserves are often concentrated in regions that are geopolitically sensitive or fare poorly from an ease of doing business perspective.
• Second, a portion of existing production is controlled by geostrategic competitors.
  • For example, China wields considerable influence in cobalt mining in the Democratic Republic of Congo through direct equity investments and its Belt and Road Initiative.
• Third, future mine production is often tied up in offtake agreements, in advance, by buyers from other countries to cater to upcoming demand.

Steps taken by the Government:

• As a first step towards the sourcing of strategic minerals, the Indian government established Khanij Bidesh India Limited (KABIL) in 2019 with the mandate to secure mineral supply for the domestic market.

Suggestions to build resilient mineral supply chains:

• First, figure out the mineral requirements of the domestic industry.
  • Creating five-year road maps with clear targets for deployment and indigenous manufacturing across clean energy applications would provide visibility to domestic investors.
  • On this basis, determine the quantities of minerals necessary to support indigenous manufacturing.
• Second, coordinate with the domestic industry to determine where strategic interventions by the government would be necessary for the purpose.
  • KABIL could collaborate with industry to bolster its market intelligence capabilities for tracking global supply-side developments.
  • If there is adequate visibility on sourcing opportunities in conducive geographies, the private sector should be encouraged to secure minerals for its own requirements.
• Third, if conducive investments opportunities don’t exist, KABIL should pre-emptively sign offtake agreements with global mineral suppliers to secure future production.
• Fourth, the government should jointly invest in mining assets with geostrategic partners.
• Fifth, support technologies that utilise domestically available materials. The deployment of technologies such as sodium-ion batteries could reduce requirements for sourcing minerals from beyond India’s borders.
• Lastly, develop policies on urban mining aimed at recycling mineral inputs from deployments that have completed their useful life. These could help further reduce dependence on international sourcing.

Way Forward:

• Besides Ukraine, other potential geopolitical flashpoints also exist against a backdrop of dwindling multilateral cooperation. India must act immediately and decisively to mitigate these risks to its energy security.