Budget 2024: Customs duty exemption on critical minerals step towards making India global hub

India's quest for critical minerals security got a boost with the Union Budget 2024-24 announcing to set up of a 'Critical Mineral Mission' and to exemption of customs duties on key 25 critical raw materials.

''We will set up a Critical Mineral Mission for domestic production, recycling of critical minerals, and overseas acquisition of critical mineral assets,'' Union Finance Minister Nirmala Sitaraman announces in her budget speech. She says the Mission's mandate will include technology development, a skilled workforce, an extended producer responsibility framework, and a suitable financing mechanism.

Further, she announces to fully exempt customs duties on 25 critical minerals and reduce BCD on two of them. Minerals such as lithium, copper, cobalt and rare earth elements are critical for sectors like nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics. ''This will provide a major fillip to the processing and refining of such minerals and help secure their availability for these strategic and important sectors,'' she says in her budget speech.  

These critical minerals are antimony, beryllium, bismuth, cobalt, copper, gallium, germanium, hafnium, indium, lithium, molybdenum, niobium, nickel, potash, REE, rhenium, strontium, tantalum, tellurium, tin, tungsten, vanadium, zirconium, selenium, cadmium, silicon other than quartz & silicon dioxide. These had a customs duty of 10%/7.5%/5%/2.5% range. BCD on graphite and silicon quartz/silicon dioxide was reduced from 7.5% to 2.5%.

Besides, the Union Budget announces to launch of the auction of the first tranche of offshore blocks for mining, building on the exploration already carried out.

The combined market value of key energy transition critical minerals – copper, lithium, nickel, cobalt, graphite and rare earth elements – will more than double from the current $325 billion to reach $770 billion by 2040, estimates the International Energy Agency (IEA). China controls a major share of these critical minerals. While the U.S. and European companies play a major role in copper and lithium supplies, Chinese companies have a greater role in nickel and cobalt production, despite these minerals being mined in countries like Indonesia for nickel and the Democratic Republic of the Congo for cobalt, says the IEA.

''Custom duty exemption for critical minerals for supporting Lithium-ion battery manufacturing as well as the associated supply chain is a great move in the direction towards making India the global hub for critical minerals,” says Rahul Walawalkar, President of India Energy Storage Alliance (IESA).

''Energy transition is at the keystone for reliable inclusive economic growth and the Government recognized the same with its focus on developing many pathways to energy transition like easing access to key minerals," says N Venu, MD and CEO, India and South Asia, Hitachi Energy.

In July 2023, the Union Cabinet had approved amendments to the Mines and Minerals (Development and Regulation) Act-1957 to allow the mining of lithium and other minerals. Three Indian state-run companies, National Aluminium Co Ltd, Hindustan Copper and Mineral Exploration Corp formed a joint venture to buy mining assets overseas that have minerals such as lithium and cobalt, which are used to manufacture batteries for electric vehicles.  

India enacted the Mines and Minerals (Development and Regulation) Amendment Act, 2021, which enabled captive mine owners (other than atomic minerals) to sell up to 50% of their annual mineral (including coal) production in the open market. The amendment also allowed 29 critical minerals to be eligible for exploration and mining concessions.  Another move was to allow offshore exploration of minerals, by introducing the Offshore Areas Mineral (Development and Regulation) Amendment Bill, 2023, which was passed by both houses of the Parliament.