Date: 12/10/2022

Relevance: GS-3: Infrastructure: Energy, Ports, Roads, Airports, Railways, etc.

Key Phrases: clean energy supply chains, Khanij Bidesh India Limited (KABIL), Geostrategic Competitors, off-take agreements, sodium-ion batteries, urban mining, and Government-to-government partnerships.

Why in News?

• Amid a complicated global geopolitical landscape typified by conflict, dwindling multilateralism, and rising trade barriers, building robust domestic clean energy supply chains has emerged as a key policy imperative.

Need for Resilient and indigenous supply chains for clean energy:

• Imported inflationary pressures through exposure to volatile oil and gas markets also pose risks to macroeconomic growth and stability, particularly for India, import-dependent for around 85% of its oil and half of its gas needs.
• Therefore, securing access to key minerals such as lithium, cobalt, nickel and rare earth metals is critical for building resilient and indigenous supply chains for clean energy technologies.
• As a first step towards the sourcing of strategic minerals, the Indian government established Khanij Bidesh India Limited (KABIL) in 2019 with the mandate to secure mineral supply for the domestic market.

A challenging task:

• Challenging location of reserves:
  • Reserves are often concentrated in regions that are geopolitically sensitive or fare poorly from an ease of doing business perspective.
• Geostrategic Competitors:
  • A portion of existing production is controlled by geostrategic competitors. For example, China wields considerable influence in cobalt mining in the Democratic Republic of Congo through direct equity investments and its Belt and Road Initiative.
• Offtake Agreements:
  • Future mine production is often tied up in offtake agreements, in advance, by buyers from other countries to cater to upcoming demand.

Suggestions:

• Figure out the mineral requirements of the domestic industry:
  • This could best be accomplished by a task force that includes the ministries of power, new and renewable energy, heavy industry, and science and technology.
  • Creating five-year road maps with clear targets for deployment and indigenous manufacturing across clean energy applications would provide visibility to domestic investors.
  • Further, assess the technology mix that would support this deployment. On this basis, determine the quantities of minerals necessary to support indigenous manufacturing.
• Coordination with the domestic industry:
  • Coordinate with the domestic industry to determine where strategic interventions by the government would be necessary for the purpose.
  • KABIL could collaborate with the industry to bolster its market intelligence capabilities for tracking global supply-side developments.
  • Developing a granular picture of available and committed production capacities and economy-wide and sector-specific policy developments is the first step to developing an informed perspective on mineral supply.
  • If there is adequate visibility on sourcing opportunities in conducive geographies, the private sector should be encouraged to secure minerals for its requirements.
• Offtake agreements:
  • If conducive investment opportunities don’t exist, KABIL should pre-emptively sign off-take agreements with global mineral suppliers to secure future production.
  • It could aggregate 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 could be done on preferential terms.
• Joint Investments:
  • The government should jointly invest in mining assets with geostrategic partners.
  • KABIL should make equity investments in mining jurisdictions that private sector investors may deem too risky.
  • It should leverage government-to-government partnerships to mitigate investment risks.
  • This could be done through joint investments with sovereign entities from geostrategic partners or private sector entities with expertise in specific geographies.
  • The External Affairs Ministry could initiate conversations with partner countries.
  • Establishing resilient clean energy supply chains is a priority for the Quad, for instance.
• Deployment of technologies:
  • Support technologies that utilize domestically available materials.
  • The deployment of technologies such as sodium-ion batteries could reduce requirements for sourcing minerals from beyond India’s borders.
  • While the current performance-linked incentive scheme on batteries is technologically agnostic, India could consider creating a tranche of capital to incentivize investments in technologies that rely on local raw materials. It could also propose the co-development of such technologies with geostrategic partners.
• Recycling Mineral Inputs:
  • Develop policies on urban mining aimed at recycling mineral inputs from deployments that have completed their useful life.
  • These could help further reduce dependence on international sourcing. Besides Ukraine, other potential geopolitical flashpoints also exist against a backdrop of dwindling multilateral cooperation.
  • India must act immediately and decisively to mitigate these risks to its energy.

Conclusion:

• Given that the stakes at play include energy security and industrial self-reliance, securing access to a steady source of non-fuel mineral inputs is a strategic imperative for India.
• India requires a concerted strategy to secure critical non-fuel mineral resources to further its energy security.
• Through a focus on domestic clean energy equipment manufacturing, India can reduce its dependence on global supply chains and further its pursuit of atmanirbharta, or self-reliance in both energy and manufacturing.

Source: The Hindu

Mains Question:

Q. What are the challenges to India’s clean energy ambitions and how can building a resilient mineral supply further India's pursuit of aatmanirbharta in energy by focusing on clean energy technologies?