CAPEX SUPPORT SCHEME FOR CRITICAL MINERAL PROCESSING EXPLAINED

Why In News?

The Union Cabinet approved the CAPEX Support Scheme to Promote Critical Mineral Processing to help set up domestic plants that process lithium and nickel into battery-grade materials. 

What Is The CAPEX Support Scheme?

Key Features

What The Plants Will Produce

• Lithium Plants: Process lithium ores and concentrates, excluding brines, into battery-grade products. 

• Nickel Plants: Produce Class-1 nickel (very high purity) or battery-grade nickel sulphate, with cobalt recovery. 

Selection And Disbursement

• Two-Stage Selection: Bidders must first pass technical qualification, followed by financial bidding.  

• Least-Cost Criterion: Two beneficiaries per mineral will be chosen, with priority to bidders seeking the lowest government support.  

• Milestone-Linked Payments: Subsidies will be released in three tranches linked to project milestones. 

Objectives

• Build Processing Capacity: Set up high-purity lithium and nickel processing plants in India.  

• Resilient Value Chain: Fill the "missing link" of processing between mining and battery manufacturing.  

Significance 

• Strategic Autonomy: Reduces dependence on a few countries for critical battery materials.  

• Supports Clean Energy: Ensures a domestic supply of materials for EVs and energy storage.  

• Value Addition: Shifts India up the value chain, from importing finished materials to producing them at home.  

• Cost-Efficient Design: The least-cost bidding and milestone-based payments ensure value for money and accountability. 

• Jobs And Skills: Creates high-skill jobs in chemical engineering and metallurgy. 

What Are Critical Minerals?

• Definition: Critical minerals are minerals essential for economic development and national security, whose supply is at risk due to scarcity or concentration in a few countries. 

• India's List: In 2023, the Ministry of Mines identified 30 critical minerals, including lithium, nickel, cobalt, graphite and rare earth elements. 

Uses

Processing Is The Key Link

• Value Chain: Mining → processing/refining → cell components → battery cells → EVs and storage.  

• Where The Value Lies: Raw ore has limited value. Most of the value and strategic control lies in refining it to battery grade. 

Why India Need Domestic Processing?

Rising Demand

• Energy Transition: India's targets of 500 GW of non-fossil capacity by 2030 and net zero by 2070 require huge amounts of battery storage.  

• EV Growth: Electric vehicle adoption is rising under schemes such as PM E-DRIVE.  

• Battery Manufacturing: The PLI scheme for Advanced Chemistry Cell (ACC) batteries, with an outlay of ₹18,100 crore for 50 GWh of capacity, needs a steady supply of processed materials. 

Heavy Import Dependence

• Near-Total Reliance On Imports: India depends almost entirely on imports for lithium, nickel and cobalt in battery-grade form. 

• China's Dominance: China controls most of the world's lithium refining and rare earth processing.  

• Example: In 2025, China imposed export controls on rare earth elements and magnets, disrupting supplies to automakers worldwide, including in India. This showed the risk of relying on one country. 

How Does This Scheme Fit Into India's Broader Strategy?

National Critical Mineral Mission (NCMM)

• Launch: Approved in January 2025, with ₹16,300 crore of government spending and an expected ₹18,000 crore from PSUs, over seven years.  

• Scope: It covers exploration, mining, processing, recycling and overseas acquisition. 

Legal Reforms

• MMDR Amendment Act, 2023: Empowered the Centre to auction 24 critical and strategic minerals and opened exploration of certain minerals, such as lithium, to the private sector.  

• Exploration Licences: Introduced exploration licences for deep-seated and critical minerals. 

Related Schemes

• Critical Mineral Recycling Scheme: A ₹1,500 crore incentive scheme to recover critical minerals from e-waste and used batteries. 

• Rare Earth Permanent Magnet Scheme: Supports domestic manufacturing of rare earth magnets.  

 Overseas Acquisition

• KABIL: Khanij Bidesh India Ltd, a joint venture of NALCO, HCL and MECL, acquires critical mineral assets abroad. In 2024, it signed an agreement for five lithium blocks in Catamarca, Argentina. 

Global Partnerships

• Minerals Security Partnership: India joined this US-led partnership in 2023.  

• Quad Critical Minerals Initiative: Launched in 2025 to diversify supply chains.  

What Are The Key Challenges?

Limited Domestic Raw Material

• Few Proven Reserves: India has limited known reserves of lithium and nickel. Processing plants will depend largely on imported ores and concentrates.  

• Example: The Geological Survey of India reported an inferred lithium resource of about 5.9 million tonnes in Reasi, Jammu and Kashmir, in 2023. However, the block attracted weak interest in auctions, showing how hard it is to turn discoveries into supply.  

High Costs And Technological Complexity

• Expensive Plants: Refining to battery grade needs costly, complex technology and strict quality control.  

• Technology Gap: India has limited experience in large-scale lithium and nickel refining, and leading technology is held by a few firms, many of them Chinese.  

Competing With Established Players

• Price Competition: Chinese refiners operate at huge scale and low cost, making it hard for new Indian plants to compete.  

• Price Volatility: Lithium prices have swung sharply in recent years, rising steeply in 2022 and falling afterwards. This makes investments risky. 

Resource Nationalism Abroad

• Export Restrictions: Mineral-rich countries increasingly ban raw ore exports to build their own processing industries. 

• Example: Indonesia, the world's largest nickel producer, banned nickel ore exports in 2020 to attract processing investment at home. This limits access to raw nickel for importing countries like India.  

Environmental Concerns

• Polluting Processes: Mineral processing uses large amounts of water, energy and chemicals, and generates hazardous waste. 

• Local Opposition: Projects may face community resistance if environmental safeguards are weak.  

Small Scale Of Support

• Limited Coverage: Supporting only four plants with ₹2,814 crore may be too small compared with the scale of India's future battery needs.  

• Global Comparison: Other countries offer much larger incentives. 

• Example: The United States' Inflation Reduction Act (2022) offers large tax credits for batteries using minerals processed in the US or partner countries, drawing global investment towards it. 

Skills, Infrastructure And Downstream Demand

• Skill Shortage: India lacks enough metallurgists and chemical engineers trained in battery-grade refining. 

• Uncertain Offtake: Plants need assured buyers. Delays in domestic cell manufacturing under the ACC PLI could leave refiners without customers.  

What Is The Way Forward?

Secure Raw Material Supply

• Overseas Assets: Expand KABIL's acquisitions in mineral-rich countries such as Argentina, Chile, Australia and African nations.  

• Long-Term Contracts: Sign long-term ore supply agreements with friendly countries. 

• Example: India–Australia cooperation under the Critical Minerals Investment Partnership aims to secure lithium and cobalt from Australian projects, giving Indian refiners a reliable source.  

Boost Domestic Exploration

• Speed Up Auctions: Accelerate auctions of critical mineral blocks under the MMDR Act and improve block data to attract investors.  

• Deep Exploration: Use the National Critical Mineral Mission to fund advanced exploration technologies. 

Build Technology Partnerships

• Joint Ventures: Partner with technology leaders from Japan, South Korea, Australia and the EU for refining technology.  

• Indigenous R&D: Fund research at institutions such as the IITs and CSIR laboratories on low-cost, cleaner processing.  

Create A Circular Economy

• Recycling: Scale up recovery of lithium, nickel and cobalt from used batteries and e-waste under the ₹1,500 crore recycling scheme. 

• Learn From Leaders: Recycling can become a major secondary source. 

• Example: The European Union's Battery Regulation (2023) sets minimum recycled content targets for lithium, nickel and cobalt in new batteries, creating steady demand for recycled materials. 

Ensure Environmental Safeguards

• Green Processing: Require water recycling, renewable energy use and safe waste disposal in all plants. 

• Community Consultation: Involve local communities early, with benefit-sharing through District Mineral Foundations. 

Link Processing With Downstream Industry

• Integrated Clusters: Create clusters where refiners, cell makers and EV manufacturers work together.  

• Assured Demand: Encourage offtake agreements between refiners and ACC PLI beneficiaries.  

Expand Support And Global Cooperation

• Scale Up Over Time: Extend support to more plants and minerals such as graphite, cobalt and rare earths if this scheme succeeds.  

• Use Partnerships: Work through the Minerals Security Partnership, the Quad Critical Minerals Initiative and iCET to build trusted, diversified supply chains.  

• Skill Development: Launch specialised training in mineral processing and battery materials.  

Conclusion

The CAPEX Support Scheme tackles the weakest link in India's battery supply chain by supporting domestic lithium and nickel refining. Its cost-efficient design is promising, but success will depend on securing raw materials, gaining technology, protecting the environment and linking refiners to India's growing battery industry.  

Source: PIB