Tech

Seeking atma nirbharta in Indian technology

Controlling the supply chains of strategic minerals is an exercise in consolidating power over critical technologies

India’s growth trajectory is witnessing a potential inflection point. After posting strong, broad-based GDP growth numbers signalling a roaring recovery, the foundations of a new economy are emerging. India has been witnessing a massive solar energy push, an Electric Vehicle (EV) ecosystem, and a speciality chemicals sector that is becoming a global hub. Clearly, India is moving towards a greener, cleaner, and technologically enhanced economy. In the same vein, India’s defence ecosystem is modernising and becoming a technologically-driven force with a slew of futuristic defence projects underway- stealth surface vessels, nuclear attack submarines, Unmanned Aerial Vehicles, stealth aircraft, and continuing its greatly successful missile program. However, the technology which is essential to enable all of the foregoing is dependent upon a slew of strategic minerals as inputs. From a phone to a nuclear reactor, these strategic minerals are inescapable to make it all happen. Controlling the supply chains of strategic minerals is an exercise in consolidating power over critical technologies.

Within the broad category of strategic minerals, a particular set of elements occupy a privileged position. These are rare earths- a group of 17 elements- fifteen lanthanides along with scandium and yttrium. Each of these elements has very specific properties, and substituting one rare earth with another is often not possible. The principal cause of concern is that rare earths face a monopolistic supplier in China- the vast majority of the rare earths supply chains have slowly fallen to Chinese dominion. The dangers of this fact were illustrated most starkly in 2010 and 2011, where China placed an embargo of rare earths on Japan following a flare-up in the Senkaku islands dispute. By throttling rare earth supplies, countries’ industrial and military capacities can be crippled while stunting future technological growth. With rare earths being an 

Within the broad category of strategic minerals, a particular set of elements occupy a privileged position. These are rare earths- a group of 17 elements- fifteen lanthanides along with scandium and yttrium. Each of these elements has very specific properties, and substituting one rare earth with another is often not possible. The principal cause of concern is that rare earths face a monopolistic supplier in China- the vast majority of the rare earths supply chains have slowly fallen to Chinese dominion. The dangers of this fact were illustrated most starkly in 2010 and 2011, where China placed an embargo of rare earths on Japan following a flare-up in the Senkaku islands dispute. By throttling rare earth supplies, countries’ industrial and military capacities can be crippled while stunting future technological growth. With rare earths being an inexorable requirement for modern life itself, India’s economic and military security call for a concrete plan on the subject.

“You don’t control your destiny — if the price goes up, China can still bring it down”.- CEO of Geomega Resources Inc., Kiril Mugerman

China is a country blessed with mineral resources, and its reserves of Rare Earths is no exception. However, while it has just above a third of the world’s known reserves, it has an iron grip over around 58% of the global rare earth production. While this is a significant reduction from its earlier 90% share, China’s control over the global market remains a pain point for all involved. 

China’s present pole position is not sui generis, but an outcome of a very long and consistent strategic effort. The “863 Program” to develop advanced technologies was inaugurated in 1986 and included a focus on “New Materials”, the scope of which was subsequently expanded over the years. A long term view and consistent support from the Chinese government has cemented its present dominance in the field. In the 1980s itself, China branded rare earth minerals as a strategic commodity and used a wide variety of economic tools to nurture the industry through the decades. Added to this are the usual Chinese inflictions of market manipulation, intellectual property theft, capital restrictions, export restrictions, and subsidies. Two more underhanded methods further boost Chinese capabilities- complete disregard for environmental concerns, and strategic acquisition of foreign firms for their technical know-how, after bankrupting them by crashing prices. These methods are not unique to the rare earth market- moving up the value chain and acquiring strategic know-how through all means necessary is a thinly veiled Chinese objective

So why is China so keen on rare earths? The answer is obvious, albeit multifaceted:

  • Vertical integration: secure control over raw materials as well as downstream industries to secure Chinese economic interests. China has built up a formidable, integrated ecosystem in rare earths from mining to end-product manufacturing which acts as a competitive moat for other players to enter. Sunrise technologies currently being developed are rare earth intensive, and controlling their supply chains can secure China’s future as the advanced systems manufacturing hub of the world- similar to China’s present hegemony over solar panel production. China’s redoubtable rare earth mining and processing prowess subsidise China’s domestic industry and military while making the rest of the world dependent on Chinese whims.
  • Civil-Military Fusion: China’s ultimate strategic imperative of having the most technologically advanced armed forces in the world demands removing distinctions between civil and military industries. As long back as 1997, China had codified the “16 Character Strategy” which, when translated, reads- “Combine the military and civil; Combine peace and war; Give priority to military products; Let the civil support the military”. Vertically integrated industries within a context of weak intellectual property rights and the lack of rule of law provide an attractive means of accreting strategic technologies.
  • Suppressing strategic competitors’ technological advances: The concentration of rare earth materials value chains, from ore to finished product in China, ensures a relative advantage in research, simply because of access and control over the entire ecosystem. By disrupting the formation of such ecosystems in other countries, China maintains a scientific advantage. New-age technologies, particularly those related to green energy and communications, are essential for China’s global ambitions. Controlling these technologies ranks high in Chinese strategic calculus.

Under the Made in China 2025 initiative, China has continued to focus on ‘New Materials’, which include permanent magnets, to be one of the 10 industries which will receive focused State support. Therefore, the entire rare earth industrial ecosystem remains a priority for China. China possesses the industrial repertoire from mining to advanced applications, all backed by a robust research system geared towards both military and industrial advances. Rare earths will thus play a key role in China’s envisioned economic future- greener, smarter, and based on high value-added products targeted towards domestic consumption rather than exports.

China’s monopolistic position in the world’s rare earth supply has important ramifications, which smothers competition and severely limits other countries’ strategic choices. These impacts can be broadly clubbed under the following heads.

Dump and Pump

China is notorious for dumping all sorts of goods in the global market so as to wipe out the competition. This is achieved through a number of methods in concert- off-the-book reserves, maintaining overcapacity, export quotas, and State funding. India has had to repeatedly impose anti-dumping duties so as to save its industries from waves of Chinese dumping, ranging from products such as steel to chemicals. The motivation behind such actions is rather obvious. By flooding markets with artificially cheap products from time to time, depresses market prices and turns firms based in other countries uneconomical, driving them out of business. In industries involving heavy capital expenditure, long gestation periods, or super specialised expertise, it is not possible to reopen or re-enter the markets in a short time when prices increase again. Thus, China reaps supernormal profits in the years after dumping as it can charge inflated premiums in markets devoid of competition. The Rare Earth industry is a perfect case of such unbridled mercantilism by China, where a relatively demand inelastic market ensures handsome gains for the Chinese Communist Party (CCP). 

A rare earths roadmap for India Seeking atma nirbharta in Indian technology

Downstream Support to Industries

During periods of extreme export restrictions, such as in 2010-11, the entire world was left scurrying to fend for Rare Earths supplies. China’s strategic imposition of export quotas on its rare earth exports led to a more than 700% jump in global prices, crippling downstream industries dependent on rare earths worldwide. Such blatant market manipulation led to a windfall for Chinese domiciled firms, as the supply glut enabled them to produce key components such as magnets cheaper than ever before. Indeed, such export restrictions created a favourable glut of raw material for manufacturers, enabling them to effectively scale up. Thus, China cornered the global market for key rare earths products as well. The Chinese have three interrelated, vertically integrated monopolies- mining, processing, and production, which act as a strategic choke on the rest of the world while being an implicit subsidy for its strategic industries. Systems of global commercial governance proved moribund- it took the WTO four years to rule against China for its export quota move, long after the crisis had passed.

“Unrestricted Warfare”

In 2010, China and Japan witnessed rising diplomatic tensions due to a resurfacing of the Senkaku islands dispute. A Chinese “fishing boat”, which is more than likely a grey zone actor belonging to the Chinese Maritime Militia, collided with Japanese patrol boats, and was captured. In retaliation, China proceeded to illegally impose an embargo on rare earth exports to Japan. The same year, it used this very technique against the United States when it began to investigate Chinese firms’ trade practices for illegalities. Such behaviour fits perfectly with the well established Chinese doctrine of “unrestricted warfare”- where pressure is built on one sphere of interstate relations so as to gain concessions in another Essentially, China weaponises all interstate relations and has no qualms in using relations of all kinds either to build dependency by others or to steal strategic knowledge. In Japan’s case, China used its rare earth monopoly as a means of bullying concerning an issue rooted in a territorial dispute. The same could very well be inflicted on any other country in the future, which would leave long term dents on its electronics and strategic capacities.

Of key importance to China is the acquisition, assimilation, and perfection of dual-use technologies (i.e. having both industrial and military uses). In the rare earths field as well, China has been proactive in its efforts. In 1997, Magnaquench was sold to a Chinese State-Owned consortium headed by Deng Xiaoping’s son-in-law. Magnaquench was a market leader in neodymium magnets, having applications across data storage, automotive, and critical weaponry. Despite a ‘Mitigating Agreement’ preventing Magnaquench’s new Chinese owners to moving production and jobs to China for a period of ten years, an ex-employee stated that its top of the line neodymium-iron-boron magnet production line was “duplicated in China” and that, after the Chinese “made sure that it worked, they shut down” the U.S. production in Indiana. The employee added, “I believe the Chinese entity wanted to shut the plant down from the beginning. They are rapidly pursuing this technology.”. Magnaquench was the United States’ only source of neodymium-iron-boron magnets, which has irreplaceable uses in weaponry.

State Administration for Science, Technology and Industry for National Defence (SASTIND), China’s counterpart to the United States’ DARPA, is known to be monitoring foreign technologies, including all those imported into China through joint ventures. China thus engages in extensive oversight of imported dual-use technology. This effort is the stepping stone to translating foreign technical data, analysing it, and assimilating it for industrial and military programs.

India’s rapidly growing economy currently has two massive input deficiencies which threaten its stability- oil, and rare earths. The two constraints are closely related to each other- rare earth minerals are essential for green energy generation as well as for green technologies like LEDs and Electric Vehicles. Energy security aside, the broader umbrella of strategic minerals (which contains rare earth minerals) has a litany of critical applications- chemicals, electronics, and defence. India has many key rare earth minerals’ reserves already identified. Furthermore, explorations in this field have only recently commenced in a big way- the discovery of more reserves is a foregone conclusion since the occurrence of rare earths is largely a function of a country’s area.

Rather ironically, India was one of the pioneers in the rare earth industry. The Public Sector Undertaking (PSU), Indian Rare Earths Limited (IREL), has been up and running since 1949, implying decades of industry work. It remains as India’s largest producer and exporter, and that’s where the problems begin.

India’s Policy Structure

India’s present underperformance is a direct consequence of a policy error that has continued unabated for decades. One would notice that IREL, the PSU monopolist in the rare earths mining space (save for Kerala Mines and Minerals Limited, a government of Kerala undertaking), is owned by the Department of Atomic Energy (DAE), India’s apex civil nuclear agency. This was primarily because of India’s nuclear energy program espousing the long term aim of using Thorium as a nuclear fuel, and unfortunately, Thorium is prevalent in the same beach sands where other rare earth minerals also occur. The consequence of this circumstance was that these mineral-rich beach sands were brought under the ambit of “prescribed substances” in the Atomic Energy Act, 1962, granting the Central Government a monopoly. This self-imposed restriction has been extended further under the Atomic Mineral Concession Rules, 2016, which flow from the 2015 Amendments to the Mines and Minerals (Development and Regulation) Act, 1957. The two read together to make the picture much clearer: ranging from Beryllium and Lithium, rare earths such as Titanium and Niobium have also been handed over to India’s atomic agencies. Such essential materials being turned into government monopolies only exacerbates pre-existing bottlenecks. 

Though reports exist on the Government thinking of partial privatisation, that in and of itself won’t improve the situation significantly. In fact, IREL exports low-value rare earth ores, often to Chinese processors, due to a lack of impetus on building complicated and costly processing facilities. One-off initiatives such as the upcoming Samarium-Cobalt Permanent Magnet plant in Visakhapatnam cannot substitute for a lab-to-product ecosystem, which necessarily has to be centred around strategic needs and commercialisation.

Expertise Mismatch

One of the most vexing problems arising from India’s policy structure is that rare earths with super specialised uses but across multiple industries become vested within just one domain- atomic energy. Thus, the present system ends up separating the rare earths ecosystem from other R&D ecosystems like electronics or metallurgy. This severely impacts the overall umbrella of strategic research, undercutting the interdisciplinary and integrative nature of modern, solution-oriented research work. The situation is similarly balkanized with regards to exploration, whereby the Geological Survey of India (GSI), Mineral Exploration Corporation Limited (MECL) and Atomic Minerals Directorate for Exploration and Research (AMD) operate in overlapping spheres while being in siloes. 

Incentive Mismatch

Betraying its name, IREL’s primary source of revenues is not rare earths at all. Most of its income comes from the production and marketing of other minerals contained in beach sands- ilmenite, sillimanite, and zircon. With access to lucrative beach sands with easily recoverable minerals, IREL has little need to produce and research just as much as demanded by India’s assorted government research establishments. Thus, IREL has poor incentives to refocus itself as a globally competitive rare earth extracting and processing firm. This has restricted India to continue as a low-cost exporter of rare earth oxides instead of higher value-added products, unconnected to India’s strategic needs and those of industrial users. Value addition is the crux of not just strategic self-reliance but to move up Global Value Chains, whereby India can supply intermediate and finished products instead of exporting cheap raw material. Furthermore, it suffers from the same Byzantine bureaucratic restrictions and low innovation incentives which infest India’s Public Sector firms. 

Linkage Mismatch

There exist gaping disconnects between all components of India’s rare earth ecosystems. Research on rare earths is dominated by the DAE and the Bhabha Atomic Research Centre (BARC), with little, piecemeal representation from the State-owned Council for Scientific and Industrial Research (CSIR) laboratories or Defence Research and Development Organisation (DRDO). The participation of universities is also minimal. Conspicuously, industry and the private sector have a nigh absence in the field, reflective of absent linkages. Not only is the volume of research low, but collaborations between these research stakeholders is also sorely lacking

This fragmented, siloed, and severely inefficient research system is a far cry from developing end-user and strategic technologies, and ultimately commercialising the same. In toto, India simply lacks an ecosystem where effective research can take place, and ultimately be converted into products. While a good deal of such sorry status quo is due to the policy structure adopted, the fact of the matter is that there doesn’t exist an institutionally collaborative focus on rare earths, and poorly organised research initiatives are working in isolation. 

A similar break-in linkage exists between miners and processors on one end and the end-user on another. It is imperative to realise that the supply and demand of rare earth minerals require careful analysis and information flow owing to long timelines and high costs. Until the mining and manufacturing ecosystems do not have a reliable dialogue on the quality and quantity of demands, preparing a coherent strategy will be difficult. This exchange of expectations is a necessary precursor to coordinated research and production efforts, which any nascent industrial ecosystem requires. Currently, there exists no broad strategic direction whereby a concerted, joint effort can be made in conjunction with the end-user’s requirements.

License- Permit Raj

India’s 1991 Economic Liberalisation was not a uniform process, and the reform momentum has been glacial when it comes to certain sectors. Thus, sectors such as agriculture and mining continue to have a very restrictive and elaborate regulatory regime governing them, with clearances coming in costly and time-consuming. A few illustrations of India’s kafkaesque regulatory regime are as follows.

    • Regulatory Risk: On 20 February 2019, the Central Government amended the Atomic Minerals Concessions Rules, 2016, whereby threshold values for a range of minerals were drastically reduced. This decision effectively nationalised beach sands containing any monazite overnight, forcing a multitude of private players out of business. Many beach sand players which were exploiting sands for materials having no nuclear use were severely impacted. Such volatile regulatory guidance in a sector demanding long gestation and cost-recovery periods is a disincentive in all but name.
    • Investment Risk: The Japanese owned firm Toyota Tsusho Rare Earths India (TREI), established in 2009, could not begin production of rare earth oxides until 2016 despite India and Japan issuing a joint declaration in 2010 on rare earths, followed by an MoU in 2012. Even now, the firm basically ships ores, oxides, and slurries to Japan for processing, followed by Japanese firms capitalising on the finished products.The sheer difficulty of getting all adequate licenses and clearances (particularly those relating to land acquisition and environment) ensure minimal private sector involvement.

 

  • Judicial Risk: Building public opposition to key projects using foreign-funded NGOs has emerged as the chosen modus operandi of India’s strategic competitors. Whether the issue is supposed environmental concerns, or public health, the judiciary and the government have tended to be overcautious against targeted facilities. It should thus come as no surprise when India’s National Security Advisor, Ajit Doval, characterises civil society to be “the new frontiers of war”. The Sterlite Copper Plant in Thoothukudi, Tamil Nadu, is still reeling under an adverse court order despite independent studies showing the plant was not in breach of environmental norms. This occurred in the wake of protests whipped up by elements having dubious antecedents. The net result has been disastrous- India’s copper production dropped by around 45%, and India was forced to become a net importer of a key metal which it used to be an exporter of. Similarly, Chinese involvement is suspected of stoking labour unrest in Foxconn’s Chennai factory as a part of a broader effort to impede India from becoming a competing manufacturing hub.

 

Focus

An inordinate strategic error has been made and perpetuated by placing all rare earths under the Department of Atomic Energy’s ambit. The lack of focus on developing rare earth chemistry and application as a priority in and of itself hinders progress. The time is ripe for a specific focus set being adopted for rare earths as a whole, independent of minerals used exclusively in the nuclear space.

  • Mineral Selection: Based on availability and criticality of rare earths, the Ministry of Mining has conducted an analysis for prioritising efforts in both exploration and foreign acquisition. India has an established relative abundance of Light Rare Earths: elements from Lanthanum to Samarium, making them an obvious starting point. Neodymium is a core requirement for permanent magnets in both civilian and military uses, which is another mineral to have a keen eye on. In addition, India has begun discovering Lithium deposits as well, which offer much promise. In line with foreign acquisition needs, India has been showing proactiveness. A joint venture of three PSUs, named Khanij India Bidesh Limited (KABIL), has been slowly entering into long-term contracts for India’s critical mineral needs. Thus, the few key minerals thus identified should occupy maximum attention, whereby strategic efforts move step by step in acquiring key capabilities.

A rare earths roadmap for India Seeking atma nirbharta in Indian technology

A rare earths roadmap for India Seeking atma nirbharta in Indian technology

  • Nodal: Creating a Department of Rare Earths (DRE) within the Ministry of Mines can be an important first step, so as to have a nodal agency to coordinate and plan India’s efforts. The principal responsibility for the Department would be liaison with government agencies, PSUs, and industry. The Department can, as its strengths increase, be used to set up Special Purpose Vehicles and new PSUs along the lines of ISRO under an overseeing Strategic Minerals Commission.
  • IREL Demerger: IREL should be demerged into two different entities with appropriate amendments to the Atomic Energy Act’s Schedule- one focusing exclusively on Thorium extraction and retained under the Department of Atomic Energy, while the remaining entity (having KMML merged with itself, ideally) specialising in other available rare earth processing which would come under the proposed DRE. The DRE’s corporation can be provided with an exception to mine and process beach sands specifically for rare earths. These two entities must have a suitable Materials Sourcing Agreement in place, whereby the two will swap or supply each other their products, processed affluents and other waste products so as to ensure there is no inadvertent competition for the raw material i.e. beach sands.
  • Exploration: A consolidation in the exploration of rare earths is necessary. The National Mineral Exploration Policy of 2016 had a proposal to set up the National Centre for Mineral Targeting (NCMT) to replace the present system of having committees within the Geological Programming Board of the Geological Survey of India. The proposal is yet to fructify into reality. Giving life to the proposal for the NCMT and ensuring the presence of all agencies currently involved in the exploration process (including PSUs) will be necessary for optimal exploration efforts.
  • Exports and Imports: India’s current practice of exporting away low valorisation ores when such resources are critical to its economy and defence is an absurdity. Rather than repeating TREI’s underwhelming results, India must rather focus on domestic value addition using a combination of technology transfers as well as indigenous research. Friendly nations’ governments and firms can be invited and incentivised to open export-oriented facilities in Public Private Partnership mode- joint ventures with IREL’s DRE entity, and with technology transfers. Similarly, a calibrated and dynamic import duty policy is in order. In case of minerals where India is trying to build a domestic supply chain, long-term import duties may prove crucial to incentivise industry efforts.
  • Downstream Liberalisation: Private industry must be incentivised and enabled to set up processing capabilities beyond the extraction and oxidation phase. Such a move will be crucial for higher value added products having robust domestic supply chains. Furthermore, this is an unavoidable precondition to having a diversified and competent rare earths sector which can drive India’s economic and defence initiatives. The importance of private players for innovation and competition cannot be overstated, and their presence is irreplaceable in India’s overall industrialisation owing to synergies which will emerge especially in the context of a green economy. 
  • Regulatory and Judicial Risk Mitigation: A statutory blanket of protection to strategic minerals’ facilities, much like how facilities which handle nuclear materials, should be extended to insulate them sufficiently from regulatory and judicial risks. Similarly, owing to the fact that these minerals generally tend to have ‘dirty’ chemistry with environmental ramifications and unique economics, a separate regulator should be instituted for the space.

A rare earths roadmap for India Seeking atma nirbharta in Indian technology

Linkage and Integration

The process of building a strategic minerals ecosystem suffers from a chicken and egg problem- one wouldn’t invest in downstream industries if upstream facilities are not established; upstream industries would have no impetus to expand if there are no downstream buyers. Ensuring a balanced expansion of these two ends is the key to a sustainable industry ecosystem. Overcoming this economic hurdle requires a concerted strategic approach.

  • Advance Market Commitments (AMCs): AMCs are basically binding pre-orders i.e. the Government has a clear advance commitment of purchasing a certain good at a particular price. Providing AMCs to a capital intensive and nascent industry will provide stability to demand guidance for interested players and ensure adequate capabilities are set up by the private sector.
  • Strategic Reserves: India has been scaling up and accumulating petroleum reserves for emergencies in the recent past. The logic there applies equally to rare earths- they’re both essential commodities over which India is import dependent. Having Rare Earth Strategic Reserves can help provide a consistent demand environment, as well as a fallback at times of global squeezes caused by Chinese actions.
  • Financial Incentives: Access to cheaper capital, tax concessions, a timed exemption from District Mineral Foundation donation requirements, and providing a sovereign guarantee to corporate bonds floated for strategic mineral facilities can channelise much needed investment into the sector. Another very effective means of incentivising industry is through the use of Viability Gap Funding (VGF) to firms willing to enter the space. Furthermore, exemptions and commercial headwinds already being experienced by key related sectors such as green energy, electric vehicles, specialty chemicals and technology intensive products in India will have a positive ripple effect onto the strategic minerals space if private players enter the fray. The expansion of the Production Linked Incentive (PLI) scheme to semiconductors shows the way- it places incentives across the semiconductor supply chain. Fabrication, assembly, testing, and packaging are all eligible. A well drawn out PLI scheme for strategic minerals, building on the insights from the PLI-semiconductor experience, can be a game changer.
  • Information Fusion: The Indian Bureau of Mines (IBM) operates as the principal data collector and disseminator in the space. The agency has long experience and the competency to be transformed into a real-time data fusion centre, allowing for instant access to key demand and supply indicators across the value chain. IBM can become the missing link between the demands of the mining sector and the prospects for mines and processors. Using predictive tools and modern data analytics can set the grounds for a transparent and efficient industrial space. The IBM could ultimately be subsumed in the proposed NCMT.
  • R&D: The country lacks specialised R&D in rare earths, and this can seriously stymie domestic industrial efforts. Therefore, the twin strategies of setting up domestic R&D centres of excellence along with the acquisition of foreign data and talent are necessary. Concentrating efforts in a handful of highly ranked universities, access to mines, industrial linkages, tie-ups with foreign research endeavours, and onboarding former national and international faculty on short tenures is a prudent way forward.
  • Recycling, Green Chemistry, and Substitution: India’s chemistry-intensive heavy manufacturing sector has, of recent, seen enhanced investor interest. This comes on the back of a slow buildup in India’s commercial chemistry skills and R&D efforts, which has set up a veritable industrial base. Augmenting these efforts with public policy and research for an outcome focussed outlook in the following three heads can be transformative:
    • Recycling: India’s e-waste processing sector has seen burgeoning growth and sophistication. Some of the rare earths present in global e-waste can be extracted and recycled this way, ameliorating supply chain efforts. Apart from e-waste, rare earth recovery from the waste products or residues from the processing of other, more frequently found minerals too should be actively explored.
    • Substitution: Finding innovative means of subsidising more critical elements with less, more readily available ones has been a particular concern for the west for a few years. India too should focus on reducing its dependence on minerals where domestic and friendly supply sources are scarce.
    • Green Chemistry: As mentioned above, rare earth chemistry tends to be dirty i.e. polluting and hazardous. However, a concerted research effort into greener, cleaner chemistry (which already exists in some pockets of the Indian chemical industry space) can enable India to secure its resource needs while simultaneously emerging as a processor of choice.
  • Blue Economy: India’s high skilled chemistry labour, low costs, and policy push can enable India to open processing facilities using predominantly imported ores. This will be particularly true for Indian acquired mines in Africa and Latin America, which are essential sources of Heavy Rare Earths. Plus, most of the present reserves are in beach sands. Therefore, setting up of these facilities near the coastline, with fast access to ports is vital. Further, India can stay future ready for possibilities such as deep ocean mining, which it is known to be pursuing. Further, India has rich deposits in its Exclusive Economic Zone within the Indian Ocean; as India’s Deep Ocean Mission progresses and extraction technologies mature, having facilities onshore will be an exercise in future-proofing.

Rare Earth Quad

The Quad grouping of India, USA, Australia, and Japan have been known to have set up a ‘Critical and Emerging Technology’ working group, which subsumes critical minerals’ supply chain security. Recently, these countries have been signing bilateral agreements on the matter, and a consensus seems to be emerging. This development can foster a meaningful change for India. All the above countries were either producers of rare earths, or processors, or both. Economic diplomacy can rope in more like minded countries, bringing important capabilities to the table- France, UK, Germany, etc. Their combined efforts and willingness to collaborate can counter China’s present monopoly in two important ways- by diluting the monopoly itself as production comes online, and by forming a monopsony (a big buying bloc having a large proportion of global demand). This will not only increase all parties’ bargaining power, but allow for a slow decoupling from Chinese dependence. Reducing Chinese dependence on emerging and strategic technologies will provide a great fillip to Indian ambitions- economic and military. The use of import-export and capital whitelists with such friendly countries, joint ventures with transfer of technology, willingness to participate in decentralised processing, and getting investment (both financial and scientific) into India’s critical materials sector will leverage India’s attempts to their fullest potential.

India’s economy and military not only need to be insulated from external shocks, but their intrinsic strength needs to be developed to the fullest. The fragility of global supply chains, as well as Chinese disregard for a rules based global order, have forced India to recalibrate its modus vivendi. This crisis, however, is an opportunity for India to consolidate its future as an economic, military, and scientific power. There is much that is possible in this space, which begins with unshackling self-imposed policy shibboleths. If a careful and consistent effort on rare earths is made, India’s prospects won’t only be secured- they’ll be empowered.

Special thanks to Professor Gautam Desiraju from the Indian Institute of Science (IISc), Bengaluru, for his guidance.

Deekhit Bhattacharya is a senior research associate at www.globalorder.live, an experimental policy research centre. Views expressed are personal.

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