Context

The global energy transition is moving at a slower pace than required due to difficulties in securing critical minerals. Their production, refining, and processing are concentrated in a few nations, primarily China. China dominates the landscape, accounting for approximately 51.7% of the world’s known rare earth reserves, followed by Brazil with about 25.7%. For high-demand minerals like lithium, nickel, and cobalt, China accounts for 10–30% of global raw extraction but controls 60–70% of refining and processing capacity, alongside roughly 90% of rare earth refining. Between 2020 and 2024, the combined market share of the top three producers—Indonesia, the Democratic Republic of the Congo, and China—rose from about 82% to 86%. Resource nationalism is also increasing, with export bans on raw nickel in 2020 and bauxite in 2023 by Indonesia, and a suspension of raw material exports by Zimbabwe.

Early signs of a financing gap in India

The International Energy Agency (IEA) estimates that approximately USD915 billion of fresh capital investment is required globally for mining and refining over 2026–2035 under the Announced Pledges Scenario (APS). India faces similar challenges, though quantifying its specific financing gap is difficult due to limited publicly available data. The National Critical Mineral Mission (NCMM) creates regulatory and institutional enablers but does not provide direct budgetary support for capital expenditure in large-scale mining, refining, or processing. Investment is expected from Public Sector Undertakings (PSUs) and private players, yet missing elements include risk-sharing capital for exploration and dedicated capex support for midstream processing.

Understanding financing problems in the critical minerals supply chain

Upstream mining projects for critical minerals are capital-intensive and typically take 10–15 years to move from exploration to commercial production. Rollout of the 2023 MMDR Amendment Act has been slow, with most exploration licences going to PSUs. India also lacks the institutional ecosystem found in global hubs like the TSX-V, meaning entities must see projects through from exploration to production without an exit option. In the midstream segment, feedstock risks and volatile prices deter investors. For example, a nickel processing plant with a 12,000 tonnes per annum (tpa) capacity requires approximately USD108.8 million in capex and USD93.5 million in annual opex. Recycling also faces challenges; a 2,500tpa plant requires an investment of INR250–300 million, but revenue uncertainty and technology risks regarding recovery rates reduce economic viability.

Institutional and policy enablers in India

India announced the NCMM in January 2025 with an outlay of INR343 billion (USD~3.7 billion) over seven years. The mission aims to target 1,200 exploration projects and the auction of over 100 critical mineral blocks by 2030–2031. To support investment, the MMDR Amendment Act 2025 eliminates additional inclusion payments and provides a 50% auction premium discount for early production. The Union Budget (2026–2027) includes a proposal for setting up dedicated rare earth corridors to contribute to the manufacturing of permanent magnets. However, domestic processing capacity remains limited. For comparison, the US government committed USD1.4 billion in November 2025 to accelerate its domestic rare-earth magnet recycling and manufacturing scale-up.

Manufacturing and recycling growth has been slow as upstream supply chains remain underdeveloped. Under the Advanced Chemistry Cell (ACC) Production Linked Incentive (PLI), 40GWh of battery manufacturing capacity has been awarded, but installed capacity remains negligible. To address this, the Rare Earths Permanent Magnets Scheme was announced in November 2025 with an INR72.80 billion outlay. India is also building bilateral partnerships with nations such as Australia, Argentina, Peru, Chile, and Zimbabwe, and is part of multilateral frameworks including the Minerals Security Partnership (MSP) and the Quad Critical Minerals Initiative.

The way forward

Critical minerals are capital-intensive, high-risk, and long-gestation assets. Without strategic government intervention, India risks fragmented investments and continued import dependence. State coordination, risk-sharing, and long-term policy clarity are essential. While the NCMM creates intent and incentives, ultimately, successful outcomes will be determined by institutional execution. India’s institutional framework requires further strengthening to ensure projects are de-risked and the industry becomes commercially viable.