Govt Mulls Penalties To Speed Up Critical Mining of Minerals

Top officials said the main focus of the strategy to "speed up the process of extracting critical minerals by disincentivising laggards in mining."

In a draft of the Mineral (Auction) Second Amendment Rules, 2025, which is being circuated to stake-holders, the central government has introduced penalties as a percentage of the performance guarantee to be paid by the successful bidders of a mining block.

Performance guarantee by a successful bidder is the promise to fulfil non-monetary obligations, like completion of a project on time and up to the agreed-upon quality. Quite often, a third party, like a bank, offers such a guarantee on behalf of the contractor or producer.

"The draft amendment rules stipulate that if the exploration does not start within four months of allotment, the allottee must pay the penalty," explained officials.

The objective is to create an uninterrupted supply chain to meet the domestic demand for critical minerals, particularly heavy earth elements like lithium, nickel, cobalt, silicon and copper. These are essential production elements for solar panels, wind turbines, electric vehicles (EVs), and energy storage systems, including batteries.

"Unless we have our own production, we will always remain dependent on imports and in case of conflicts like the recent one, our supply lines may well be compromised by enemy action," pointed out officials.

Rounds Of Auctions To Find Critical Minerals

Auctions for critical mineral blocks were initiated in November 2023. In the subsequent four rounds, 24 critical and strategic mineral blocks, out of a total of 48 offered, have been successfully auctioned till now.

The list of successful bidders includes many of India's major mining corporations and private companies like the Vedanta Group, Oil India Limited (OIL), Hindustan Zinc Limited, and Assam Mineral Development Corporation Limited.

The process of auctioning these blocks is held online, ensuring transparency. Of the 24 successful allotments, four are mining leases, while 20 blocks have been given composite licenses.

In India, a composite license in mining is a single permit that allows the holder party to first explore for the minerals, and if deposits are found, extract these minerals from the allotted block.

The government introduced the concept of a composite license by amending the Mines and Minerals (Development and Regulation) Act of 1957, incentivising effective exploration and mining.

Minerals To Be Explored & Mined

The critical minerals to be explored and mined in these blocks include lithium, graphite, copper, nickel, cobalt, tungsten, chromium, and vanadium.

Lithium is possibly the most important among them all. It is also called the “mineral of the future”, as the metal is at the centre of India’s strategy to be self-reliant in battery manufacturing. The country, at present, imports almost the entire amount of lithium used in its manufacturing sector.

This reliance on imports makes India vulnerable to any global supply chain disruption. Therefore, any successful exploration and mining of the metal can localise part of this supply chain, providing a cushion in case of a disruption.

Supporting Policy Initiatives

In addition to possible domestic mining, the government has taken up collaborations with the US and other countries through initiatives like the Mineral Security Partnership (MSP) and the KABIL (Khanij Bidesh India Limited) joint venture to acquire mining assets abroad.

Organisations like the Shakti Sustainable Energy Foundation, the Council on Energy, Environment and Water (CEEW), and the International Institute for Sustainable Development (IISD) have also been roped in to promote innovation in mineral processing.

On other fronts, SBI Capital Markets and MECL (Mineral Exploration and Consultancy Limited) are working with the government as transaction and technical advisors.

"There is also an effort to develop advanced technologies for recycling and extracting minerals, and explore alternatives to scarce resources ... our research institutes including some IITs are working on this front," said officials.

However, all this is just the beginning of the road towards India's goal of Net Zero by 2070. In this long road ahead, India faces tremendous challenges in scaling up domestic production. How much of the critical minerals supply chain the country can localise will decide the fate of its green transition.