Rare treasure trove: Rare opportunity for India (GS Paper 3, Science and Tech)
Context:
- As new Rare Earth Elements (REE) partnerships are being establishedfrequently among China’s geoeconomic rivals, what exactly they are and how can India make the most of this.
REE- Strategic Significance:
- REE is a group of 17 metallic elements from the periodic table, comprising 15 lanthanides (Z=57 through 71), Scandium and Yttrium. These metals, found together in geologic deposits, have properties of strategic value to several economic spheres.
- Central to India’s new post-pandemic economic landscape, they present an opportunity that needs to be tapped now.
- After all, the global rare earth metal market share is expected to grow to $9.65 billion in 2026 at a CAGR of 10.3%, stimulated by their rising utility to manufacturing processes of electric vehicles, renewable energy and high-tech.
Chinese Dominance:
- China as a result of its extremely high resource concentration controls the majority of global rare earth production. This naturally poses a vulnerability to manufacturing industries and spurs supply concerns among global economies.
- Given the supply-chain disruptions observed in the past two years and China’s severe hedonistic tendencies, it is not wise to maintain dependence for such crucial raw materials.
- After how as a result of the Senkaku-Diaoyu island dispute of 2010, China had brought Japan to its knees by halting REE exports.
International Integration:
- Western nations, thus, are cooperating to develop alternatives to China to ensure continuous provision of key industrial supplies.
- Formed with the intent of dismantling Chinese control and strengthening critical mineral-supply-chains, the 2022 Minerals Security Partnership (MSP) alliancewas formed.
- This US-led initiative of 11 nations has developed processing infrastructure in REE and acquired mines in Africa for elements like Cobalt.
Role of India:
- India, despite having the world’s fourth-largest reserves of REE, imports its rare earth needs in finished form from China.
- Given REE’s omnipresence in technology, their contribution to the Indian economy is estimated to be worth $200 billion. However, several concerns have stopped India from coming to the forefront as a global REE supplier.
Issues:
- The mining and extraction processes are extremely capital-intensive. They consume large amounts of energy, and release toxic by-products- a significant issue which has instigated controversy in India in the past.
- Moreover, the current political structure is such wherein India has granted Indian Rare Earths Limited (IREL) a monopoly over monazite beach sand which contains REEs.
- IREL produces rare earth oxides, which is relatively low cost and sells these to foreign firms that extract the metals and manufacture highly end products elsewhere. It exclusively supplies thorium to the Department of Atomic Energy.
- IREL thereby accounts for a trivial proportion of the world’s production while domestic manufacturers and consumers continue to import finished-REE derivatives.
Way Forward:
- By tweaking its existing policy, India too has the potential to emerge as a rare earths supplier.
- Scaling up upstream and downstream processes in the rare earths value chain cannot be independently managed by government financing alone.
- India must open its rare earth sector up to competition and innovation so as to bridge the existing monetary gap, attract the large amounts of capital needed to set up facilities to compete with, and supply to the world.
- A specialised REE government committee is needed to oversee policy formulation, focus on attracting investment and promoting R&D as well as regulate private participation in this sector.
Revamping Policy:
- Recently, the Ministry of Mines recommended removing the 17 rare earth elements from the definition of atomic minerals to allow for commercial mining by PSUs and private companies. This will lessen India’s reliance on imports.
- Instead of a blanket prohibition, concerns regarding radioactive emissions should be addressed by effective environmental regulation.
- It is important to take a practical approach and develop policies carefully to avoid private companies aggressive pursuit of rare earth metals.
International Collaboration:
- An India-US strategic alliance is urgently needed to strengthen supply chains’ resilience with collaborative strategic initiatives. Given India’s abundant resource endowment, India’s participation in the MSP alliance can be of mutual benefit.
- India should also leverage current alliances, like Quad and BIMSTEC, to promote further integration.
Conclusion:
- Investors worldwide have turned their attention to this vital industry as a result of rising demand brought on by the energy transition and strategic worries heightened by Russia’s invasion of Ukraine.
- Inability of India to secure the REE supply chain now can result in an import-dependence similar to its current reliance on other nations for oil.
