US and India Sign Pact to Secure Supply of Critical Minerals
On 3 October 2024 in Washington DC during the 6th US-India Commercial Dialogue, US Commerce Secretary Gina Raimondo and Indian Commerce and Industry Minister Piyush Goyal signed an MOU in order to reinforce cooperation for the supply of #CriticalMinerals, including #lithium, germanium and other materials essential to the #EnergyTransition and #DigitalTransformation.
Based on the statement released by the US Department of Commerce, the agreement will focus on ‘identifying equipment, services, policies and best practices in order to facilitate mutually beneficial development of #CriticalMinerals exploration, extraction, processing, refining, recycling and recovery.’
Speaking at the Center for Strategic and International Studies (CSIS) after signing the MOU, Minister Goyal highlighted the landmark agreement which will promote diversified supply chains for #CriticalMinerals, technology development and investment flows while lowering emissions.
During his intervention he also made reference to the various Industrial Corridors which forms the backbone of the Make in India industrialization drive. The program is managed and implemented by the National Industrial Corridor Development Corporation (NICDC).
However, the MOU fell short from the expectations of India which was hoping to benefit from a USD 7,500 tax credit for EV made in India. On the other hand, it is worth noting that Japanese automakers already enjoyed such as tax incentive.
Currently, India finds itself in the ‘uncomfortable position’ to rely on China for 80% of its lithium needs and 50% for graphite which go mostly in the manufacturing of rechargeable batteries of #EV. Other than that, India also imports between 90% and 100% of its cobalt, nickel and copper.
Observers note that the agreement is necessary due to the dominance of China in this field. Thus, both US and India wish to diversify their sources and mitigate geopolitical risks. They may be looking at South America and Africa as alternative sources.
Although India recently uncovered large reserves — estimated at nearly 6 million tonnes — of lithium in Jammu and Kashmir, the commercial exploitation is not expected to materialize before 2030 due to several factors.
Another area where India and USA might cooperate is in the field of Rare Earth Elements (REE) which are critical for defense and technology applications. In that field, China dominates the market by concentrating the processing within its borders. Thus, India could ramp such capabilities in order to render the REE supply chain more resilient.
The previous India-USA Commercial Dialogue took place in New Delhi in March 2023 when a similar MOU on semiconductor was signed. In its national budget 2024-2025, India exempted import duties on 25 minerals, including lithium, gallium, germanium, cobalt, nickel and copper in order to give its EV and semiconductor industry a shot in the arm.