India’s Mines Ministry Proposes Fund to Secure Strategic Mineral Supply

India’s Mines Ministry is planning to establish a dedicated fund to support the exploration and acquisition of critical minerals as part of a broader push to secure resources essential for the country’s energy transition and economic growth.

The fund will target investments in both domestic and overseas mining projects, with a focus on securing minerals such as lithium, cobalt, nickel, and rare earth elements. These minerals are key components in batteries, electric vehicles, renewable energy technologies, and defense systems.

The proposal includes setting up mineral processing facilities abroad to reduce India’s reliance on imports of processed critical minerals from countries such as China, which dominates the global supply chain.

Two-Tier Fund Structure in the Works

The fund is expected to have a two-tier structure, similar to the existing National Mineral Exploration Trust (NMET), which supports mineral exploration within India. The new fund would focus on overseas investments and strategic acquisitions.

Officials are exploring a model where the fund would draw contributions from Indian mining companies, private equity players, and financial institutions. This approach aims to ensure the fund’s sustainability while reducing the financial burden on the government.

The Mines Ministry is also considering a mechanism to allow sovereign wealth funds to invest in the initiative, integrating it with India’s critical minerals strategy. Discussions are underway with multilateral financial institutions to secure loans for large-scale mining projects.

Collaboration with Private Sector and Financial Institutions

Private equity firms and financial institutions are being approached to participate in the fund, which is expected to operate in a public-private partnership model.

A senior official from the Mines Ministry said that the fund’s primary goal will be to support Indian companies in acquiring stakes in overseas mining projects to secure long-term supply chains.

“We are aiming to create a fund that supports investments in mining and exploration, and facilitates the processing of critical and strategic minerals overseas,” the official said.

The ministry is also evaluating options to offer financial guarantees through the fund to de-risk overseas mining investments by Indian companies. Officials believe this could help revive stalled projects and attract more private sector participation.

Repurposing Existing NMET Funds

One option under consideration is to use a portion of the ₹6,000 crore corpus held by the National Mineral Exploration Trust to kickstart the new fund.

The NMET is funded through a two percent levy on mining royalties paid by leaseholders under the Mines and Minerals (Development and Regulation) Act.

However, using NMET funds for overseas investments would require amendments to the existing legal framework. Officials are working on proposals to modify the law to allow such a reallocation.

The NMET currently focuses on developing mining projects within India, but the government sees the need to expand its mandate to align with the country’s growing demand for critical minerals.

Legal and Structural Challenges

The Mines Ministry is also assessing the legal framework needed to support the proposed fund. Officials are studying whether the fund can act as a guarantor for Indian companies pursuing overseas mining ventures, ensuring continuity in case of political or operational disruptions.

The government is keen to avoid past mistakes, where several Indian companies faced difficulties in managing overseas mining projects due to regulatory and geopolitical risks.

Securing critical minerals has become a national priority for India, as the country ramps up efforts to build a domestic electric vehicle ecosystem and renewable energy capacity.

Global competition for resources such as lithium and cobalt has intensified in recent years, with China dominating the supply of processed critical minerals.

India has been trying to catch up by securing mineral assets abroad, particularly in resource-rich countries like Australia, Argentina, and Namibia.

Global Race for Critical Minerals

The move to set up a dedicated strategic minerals fund comes amid a broader global race to secure critical mineral supplies, as countries seek to reduce their dependence on China.

The U.S. and European Union have launched similar initiatives to support domestic mining and processing capacity. The Biden administration has committed billions of dollars to critical mineral projects under the Inflation Reduction Act, while the EU is developing a Critical Raw Materials Act to boost local production.

India’s efforts to secure critical minerals will be essential to meeting its clean energy goals and ensuring the country’s long-term economic security.

Officials said the fund could also be used to acquire technology partnerships for mineral processing, which would help India reduce its reliance on imported materials and build its own supply chain capacity.