Critical minerals push continues under Modi 3.0 with customs duty cut, more reforms

The customs duty exemption in Union Budget 2025 is also set to give a leg up to the electric vehicle market and lower the battery cost.

Representative image | Commons

New Delhi: The critical minerals push has continued in the first Union Budget under Modi 3.0, with Finance Minister Nirmala Sitharaman announcing a slew of mining sector reforms.  This included the further exemption of a dozen critical minerals from basic customs duty (BCD) and the institution of a state mining index.

Sitharaman said for the manufacturing industries and Micro-, Small and Medium-sized Enterprises (MSMEs), cobalt powder and waste, the scrap from lithium-ion batteries, lead, zinc, and 12 more critical minerals will be added to the list announced in the Budget last July for complete BCD exemptions.

“This will help secure their availability for manufacturing in India and promote more jobs for our youth,” the finance minister said.

Currently, the customs duty for these minerals varies between 5 and 7.5 percent. Cutting it to zero will reduce input costs and help the domestic industry. The exemption is also set to give a leg up to the electric vehicle market and lower the battery cost.

Also, to streamline the process of transfer pricing and to provide an alternative to yearly examination, the Union Budget proposed the introduction of a scheme for determining arm’s length price of international transactions for a block period of three years.

“This will be in line with global best practices,” Sitharaman said

From mobile phones and electric vehicles to solar panels, semiconductors and wind turbines, all modern technologies are dependent on critical minerals such as lithium, graphite, cobalt, thallium and rare earth elements.

India is dependent on China and other countries to meet its requirement of critical minerals including lithium, cobalt and rare earth elements (REE).

In the 2024 Budget, Sitharaman had exempted 25 such minerals, including lithium and REE from customs duty, and also launched an auction of the first tranche of offshore blocks for mining.

Significant steps in last 3 years to boost critical minerals sector

Over the last three years, India has taken several significant steps in the critical mineral sector. This included the release of a comprehensive list of 30 critical minerals necessary for economic development and national security.

In June 2024, India also joined the Minerals Security Partnership, a US-led alliance of 14 developed countries, to, according to a media note issued by the US state department, “ensure that critical minerals are produced, processed, and recycled in a manner that supports the ability of countries to realise the full economic development benefit of their geological endowments”.

In August 2023, Parliament cleared amendments to the Mines and Minerals (Development and Regulation) Act, 1957, paving the way for commercial mining of six critical minerals—lithium, beryllium, niobium, tantalum, titanium and zirconium—and deep-seated minerals, such as gold, silver, and copper.

Until then, commercial mining of these critical minerals by private companies was prohibited. Only government agencies were allowed in exploration and mining operations.

Parliament also cleared amendments to the Offshore Areas Mineral (Development and Regulation) Act, 2002, which seeks to allow commercial mining of mineral resources in offshore areas.

Last week, the Cabinet approved the launch of the ‘National Critical Mineral Mission’ with an expenditure of Rs 16,300 crore and expected investment of Rs.18,000 crore by Public Sector Undertakings (PSUs) and other public and private entities.

The mission will intensify the exploration of critical minerals within the country and in its offshore areas. It aims to create a fast-track regulatory approval process for critical mineral mining projects. Additionally, the mission will offer financial incentives for critical mineral exploration and promote the recovery of these minerals from overburden and tailings.

The mission aims to encourage Indian PSUs and private sector companies to acquire critical mineral assets abroad and enhance trade with resource-rich countries. It also proposes the development of a stockpile of critical minerals within the country.

(Edited by Sanya Mathur)