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Rare Earths and India: Trying to run with one leg tied

In recent months, the term “rare earths” has entered drawing-room conversations, fueled by continuous media coverage. The immediate cause for this is China’s blockade of these (and other critical) minerals and their derivative products, in retaliation for Trump’s tariffs.

Suddenly, we learnt that India (and the rest of the world) depends on China for these minerals and products made from them (including magnets). These are critical inputs into motors, EVs, renewable energy, aerospace, defence, high-tech and electronics. Depending on the mineral/product, China controls between 65% and 95% of global capacity – so, effectively, China can bring entire industries to a standstill. And their current export curbs are not the first instance of weaponization – they cut off supplies to Japan in 2010, and have since threatened several others.

And until 2023, India has been pretty much asleep.

Despite having one of the largest reserves of these minerals, we don’t mine or process enough. And this is a throwback to our socialist past. The culprit has been the Mines and Minerals (Regulation and Development) Act (MMDR), 1957. Enacted sixty-eight years ago, this law inhibited private sector investment in mining.

Further, the Atomic Energy Act of 1962 meant that rare earths remained a monopoly of Indian Rare Earths Ltd. (IREL), a public sector company. And worse: IREL was underfunded and did/could not develop adequate processing capability.

Even as late as 2019, the government put further restrictions. Beach sand contains monazite (a “strategic” nuclear mineral), so private mining of beach sand was banned. The logic seems to be: ‘If it’s complicated, stop everybody.”

There has been another pernicious aspect to the law. It didn’t allow secondary minerals to be mined. Most rare earths and critical minerals are mixed with other materials. So bauxite ores might contain monazite or florencite, phosphorite might contain apatite or monazite, and so on.

So if I’m mining iron ore in Odisha and I find traces of rare earths, I cannot simply extract and sell them. This requires another license! Violators have faced criminal charges and hefty fines.

End result: India meets only a tiny fraction of its needs domestically. What’s worse is that we end up exporting much of what we produce, because we lack the technology to process it or add value!

Eventually waking up to the crisis, in 2023, the Indian government announced a Critical Minerals Mission. They amended the MMDR to allow private sector participation in select minerals, and recently auctioned exploration licenses. Various funding announcements totalling more than ₹ 35,000 crores have also been announced.

However, despite the positive intent, rule changes and funding announcements, we still find ways to make it difficult.

Firstly, monazite (with thorium) and heavy downstream rare earths are still controlled by the Department of Atomic Energy, and are not open to private players.

Further, while you are now “allowed” to mine secondary minerals – you’d still have to apply for state government permissions, provide detailed surveys of ore estimates, re-negotiate royalties and make fresh applications for environmental clearance. This can take years. Surely, we can have a more streamlined approach, without so much paperwork?

In the last year, they have auctioned a bunch of exploration licenses. The companies have the unenviable task of digging in various places, mapping the land and estimating reserves. It’s time-consuming and costly. Yet, if enough ore is found and they decide to allow a mine, this again goes to auction. While the exploration company can bid for mining rights, it gets only a royalty for taking the exploration risk.

The entire process remains extremely cumbersome, and requires approvals from multiple government agencies. This excellent article in Swarajya explains why it can take up to fifteen years for a mine to start producing!

Even if we can dig up and extract the minerals, we don’t have the technology to process them. And Indian R&D in this area is almost non-existent. A few PLIs here and there will not be enough.

Given that we will face a major economic crisis without rare earths and other critical minerals, isn’t this the perfect place to demonstrate “ease of doing business”?