Union Budget 2025-26: Long Road Ahead for India’s Critical Minerals

The Union Budget 2025-26 has emphasised reforms in the mining sector. To ensure requisite availabilities of critical minerals, customs duty rates on 12 critical minerals have been brought down to zero along with cobalt powder, waste and scraps of lithium, lead and zinc.

India, as part of its climate action strategy, has committed to meet net zero emissions by 2070 and aims to achieve 50% cumulative electric power installed capacity from clean energy sources by 2030. Such clean energy transition is fuelled by the use of select minerals, including copper, cobalt, graphite, lithium, nickel, neodymium and silicon, referred to as energy transition critical minerals. Apart from green technologies, critical minerals also play an important role in national defence, informational technology, aviation, and space research.While extraction of critical minerals has a high concentration in a few countries, processing concentration is even higher. In this piece, we analyse the recent developments in government policies that focus on improving the mining sector and the challenges that require further consideration. India must consider all its options and prepare its future path to ensure that it meets its promises on green transition. 

While extraction of critical minerals has a high concentration in a few countries, processing concentration is even higher. India must consider all its options and prepare its future path to ensure that it meets its promises on green transition. 

The Union Budget 2025-26 has emphasised reforms in the mining sector, including those for minor minerals. A policy design for the recovery of critical minerals from tailings has also been envisaged. India lacks in extraction and processing of such minerals. To ensure requisite availabilities of critical minerals, customs duty rates on 12 critical minerals have been brought down to zero along with cobalt powder, waste and scraps of lithium, lead and zinc. 

Critical minerals have been an important policy focus of the central government in recent years. In the earlier Union Budget, 2024-25, the government declared the intention of setting up a Critical Mineral Mission for boosting domestic production, recycling of critical minerals, and acquisition of critical mineral assets abroad with a mandate to include technology development, a skilled workforce, and suitable financing mechanisms. It was announced that the government would commence the auction of offshore blocks for mining. The customs duty on 25 critical minerals was reduced to zero. These minerals include, among others, copper, cobalt, lithium, nickel and rare earth elements. In addition, the basic customs duty rates on two more minerals, graphite and silicon, were reduced. 

In January 2025, the Union Cabinet approved the launch of the National Critical Mineral Mission (NCMM) to establish an effective framework for India’s self-reliance in the critical mineral sector with an allocation of Rs.16,300 crore. The PSUs are expected to contribute investment worth Rs.18,000 crore. The Mission will encompass all stages of the value chain, including mineral exploration, mining, beneficiation, processing, and recovery from end-of-life products. The aim is to intensify exploration, create fast-track post-lease regulatory approvals and offer financial incentives promoting the recovery of these minerals from overburden and tailings. The dual objectives of the NCMM align with CSEP’s work on India’s critical mineral supply chains: 

1. To secure India’s critical mineral supply chains by ensuring mineral availability from domestic and foreign sources. 
2. Strengthening the value chains by enhancing technological, regulatory, and financial ecosystems to foster innovation, skill development, and global competitiveness in mineral exploration, mining, beneficiation, processing and recycling. 

In the absence of abundant domestic production of these minerals, India has to rely on global supply chains. The primary challenges in accessing minerals are the concentration extraction and processing in a few countries at different stages of the supply chain. CSEP’s work on assessing the criticality of minerals identified 23 minerals critical for green technology transition in April 2023. Subsequently, the Ministry of Mines came out with India’s first list of 30 critical minerals in June 2023.  

Domestically, the auction regime has not encouraged investments in critical mineral extraction. Four tranches of critical mineral auctions during 2023-24, where 48 blocks were announced and only 24 of them were successfully auctioned.

A recent CSEP study on critical mineral supply chains highlights the challenges faced, both globally and locally, by policymakers in building resilient mineral supply chains for India. Domestically, the auction regime has not encouraged investments in critical mineral extraction. Four tranches of critical mineral auctions during 2023-24, where 48 blocks were announced and only 24 of them were successfully auctioned. The fifth tranche of critical mineral auctions was announced in January 2025 for 15 blocks. The recent auctions have been criticised due to irrationally high bids and a lack of interest in mining key critical minerals like lithium, nickel, cobalt and REE. With regard to the offshore minerals, the first tranche was announced in December 2024 for 13 blocks off the coast of Kerala, Gujarat and the Great Nicobar Islands. Conservation of marine environment in offshore mining areas cannot be overlooked and the government must implement strict regulatory norms in the region. 

The critical minerals mission must focus on reducing India’s dependence on the global supply chains as these are vulnerable to geopolitical risks, price fluctuations and the dominance of a few players, resulting in various bottlenecks. 

The critical minerals mission must focus on reducing India’s dependence on the global supply chains as these are vulnerable to geopolitical risks, price fluctuations and the dominance of a few players, resulting in various bottlenecks. Lowering custom duties on mineral concentrates, mid-stream products, and scraps can be beneficial for the sector, provided there are enough incentives for manufacturers to procure the raw materials domestically. Currently, there are no companies processing minerals at a large scale for clean energy technologies in India and hence, the manufacturers rely on imports. 

A recent report on Critical Energy Transition Minerals for India, a joint research project of CEEW, CSEP, ICRIER, IISD and SSEF, carries forward the message of the important role of Critical Energy Transition Minerals (CETMs) being essential for ensuring the availability of clean energy technologies, encompassing wind turbines, solar panels, batteries, EVs and the grid. The report further establishes that requisite supply chains must be resilient and sustainable so that the private actors and the government can meet the ambitious climate targets.  

India’s strategic actions can help mitigate risks and position the country as a leader in clean energy technology. Concerted efforts are required in domestic exploration, mining, processing, international cooperation, and the promotion of sustainable mining practices. India can thus secure its mineral future and support its broader energy transition goals while promoting environmental conservation and economic growth.