India must act promptly and decisively to mitigate these risks to its energy security
India must act promptly and decisively to mitigate these risks to its energy security
In his Independence Day address, Prime Minister Narendra Modi inspired the country to move forward atmanirbharta into energy by focusing on clean energy technologies. Concerns over prices and availability of oil and gas Ukraine crisis Continue to fuel global policy debates on energy security. However, the fragility of the clean energy supply chain obscures the way for countries to reduce their reliance on fossil fuels.
Imported inflationary pressures through exposure to volatile oil and gas markets also pose risks to macroeconomic growth and stability, particularly for India, which relies on imports for about 85% of its oil and half of its gas needs. is dependent. Therefore, it is important to gain access to key minerals such as lithium, cobalt, nickel and rare earth metals to create a resilient and indigenous supply chain for clean energy technologies.
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a challenging task
It is challenging in many ways. First, reserves are often concentrated in areas that are geopolitically sensitive or perform poorly in terms of ease of doing business. Second, a part of existing production is controlled by geo-strategic competitors. For example, China has considerable influence in cobalt mining in the Democratic Republic of the Congo through direct equity investments and through its Belt and Road Initiative. Third, future mine production is often tied into off-take agreements in advance by buyers in other countries to meet future demand.
As a first step towards sourcing strategic minerals, the Government of India set up Mineral Bidesh India Limited (KABIL) in 2019 to secure mineral supplies for the domestic market. Based on the CEEW study, here are suggestions that policy makers may consider to pursue this objective.
First, find out the mineral requirements of the domestic industry. This can be best accomplished by a task force that includes the ministries of power, new and renewable energy, heavy industry and science and technology. Creating a five-year road map with clear targets for deployment and indigenous manufacturing in clean energy applications will provide visibility to domestic investors. In addition, assess the technology mix that will support this deployment. Determine the quantum of minerals required to support indigenous manufacturing on this basis.
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Second, coordinate with the domestic industry to determine where strategic intervention by the government would be necessary for this purpose. KABIL may collaborate with industry to enhance its market intelligence capabilities to track global supply-side developments. Developing a nuanced picture of available and committed production capacities and economy-wide and sector-specific policy developments is the first step in developing an informed perspective on mineral supply. If there is sufficient visibility on sourcing opportunities in favorable geographical areas, the private sector should be encouraged to secure minerals for their needs.
Third, if favorable investment opportunities do not exist, KABIL should sign pre-emptive agreements with global mineral suppliers to secure future production. It can collect a reliable supply of minerals for domestic requirements and sign back-to-back sales agreements with the domestic industry. Such large-scale centralized national procurement can be done on preferential terms.
Fourth, the government should invest in mining assets jointly with geo-strategic partners. KABIL should make equity investments in mining jurisdictions which private sector investors may consider too risky. It should take advantage of government-to-government partnerships to mitigate investment risks. This can be done through joint investments with sovereign entities from geo-strategic partners or private sector entities with expertise in specific geographical areas. The Ministry of External Affairs can initiate talks with the partner countries. For example, establishing a resilient clean energy supply chain is a priority for Quad.
Fifth, supporting technologies that use domestically available materials. Deployment of technologies such as sodium-ion batteries can reduce the requirements for sourcing minerals beyond India’s borders. While the current performance-linked incentive scheme on batteries is technically agnostic, India may consider creating a tranche of capital to encourage investment in technologies that rely on local raw materials. It may also propose co-development of such technologies with geo-strategic partners.
Finally, developing policies on urban mining that aim to recycle mineral inputs from deployments that last their useful lives. These can help in further reducing dependence on international sourcing. Besides Ukraine, there are other potential geopolitical flashpoints in the backdrop of declining multilateral cooperation. India must act promptly and decisively to mitigate these risks to its energy security.