Availability of such reliable raw material sources would naturally inspire setting up of downstream industries of refining, value addition, manufacture of Rare Earth Permanent Magnets, and other high value and high technology products
by Dr. Amit Tripathi
A lot has been said in recent times about the importance of the group of seventeen metals collectively called Rare Earth Elements or REE. The importance of these metals for the economic and strategic security cannot be much overstated. China has global dominance in REE mining; processing, value addition technologies as well as global REE supply lines. China’s demonstrated capacity and willingness of using its dominance in REE towards attaining its strategic objectives combined with the recent display of belligerence in the Indo Pacific has the global community concerned. Recent upgrading of the QUAD as a potential strategic alliance is a step by the concerned global community to guard against growing Chinese assertiveness.
As its membership grows, it is possible that the QUAD may morph into an Indo-Pacific Territorial Organization akin to a NATO alliance against the former USSR.
It has been a decade of Senkaku island confrontation and the consequent Chinese REE supply squeeze on Japan, the US, Japan and its NATO allies have been talking of diversifying REE supply chains away from the areas of Chinese influence. These efforts are likely to get a boost once the discussions of QUAD head of states starts translating into strategic initiatives.
India is in a position of becoming the major player in this space and be a major supplier in the global REE supply chain. According to a US Geological Survey report China has about 37 percent of known global REE reserves but produces about 60 per cent of global REE. India has about 6 percent of global REE reserves and produces a miniscule 1 percent of global supply. India however, has an extremely high possibility of discovery of new deposits along its coastline and hard rock carbonatites that exist all over the peninsula.
India is, therefore, in a unique position of giving comfort of producing “non-Chinese” REE ore that could command a “reliable supplier” premium in the western high-tech electronics and defence industry. Large tracts of the Indian Ocean coastline from East Africa to Myanmar, Thailand, Indonesia, and Australia are also host to rich REE containing mineral sands. These sands are enriched in REEs through constant weathering and attrition of REE rich rocks over millions of years.
Availability of such reliable raw material sources would naturally inspire setting up of downstream industries of refining, value addition, manufacture of Rare Earth Permanent Magnets, and other high value and high technology products. Reliable domestic supply of these products would be a major attraction to further high value industries such as electronics, defence, electric vehicles, and many others. One can only imagine the boost this would provide to Make in India and Atmanirbhar Bharat initiatives!
The way forward is multi-fold for India. Recent changes in the Indian mineral policy initiatives have struggled, especially in the high value metals space, with converting the mineral potential to tangible mineral production. A dominant opinion in the geological community is of the opinion that the policy of revenue maximization though auctions is a major cause of this sustained imbalance. Globally mineral discoveries are done by small companies called junior explorers. Indian policy initiatives have been less than successful in creating a fertile ecosystem for this sector. Globally, several major economies have successfully premised major components of their growth on miner exploration. Such examples of proven track record of success can be a template for a progressive mineral exploration policy reforms in India. Rapid progressive movement in mineral exploration policy might incentivize enhanced exploration investment in the private sector and pave the way for rapid mineral discoveries. Mineral exploration is a high-risk business, and the global trend is for governments and Geological Surveys to withdraw from investing public funds into such high-risk sectors while creating a policy substrate for small entrepreneurs to succeed. Even large mining corporates have globally scaled down their exploration department and are largely focused on acquisition of these small juniors to strengthen their resource inventory. India, with its large land mass, well developed geological data and highly trained geologists, and excellent infrastructure has all the ingredients available to be naturally successful.
While domestic reforms are awaited, Indian companies can be encouraged to form such junior exploration businesses in the Indian Ocean Region to prospect for REEs and feed value added products into Indian market. Most governments in this region have mining and exploration friendly policies and welcome investment. India has strong historical, cultural, business and Diaspora links in this region that has developed over centuries of trade and migration. No other country enjoys such a unique strategic network anywhere in the world. This is a unique strength that can be leveraged to meet the critical metal requirements of the country. Indian companies are already leveraging these links and goodwill for current trade and business promotion and the same can be used for securing REE concessions in the region by Indian companies. The Indian Diaspora have prominent businesses and an excellent network in the host countries’ government, administration, businesses and often own and control large part of domestic businesses and inland supply chains. This is how India’s soft power and capabilities diverge from China. It is possible to effectively leverage this form of small scale, diversified pre-existing, private sector, trade and cultural networks as soft power against Chinese centralized and command system where most Chinese businesses are suspected to covertly report to the Chinese Communist Party and thus project a less than benign aura of money and hard power. Traditionally the Indian expat networks have been wary of dealing with the government, however, over the last two decades, with sustained networking support; Indian missions have built a significant goodwill within these Diaspora networks. Within the same time frame the use of Chinese hard power and capturing assets as well as financial bullying has created a backlash. Hambantota, Djibouti, Maldives and Gwadar are very much a reminder of what might happen with the Chinese financed model. Public and governments of the Indian Ocean Region are now aware of these risks and welcome private sector led Indian investment.
In the Indian Ocean Region, the mineral industry largely exists in the private sector while the governments prefer to stay in a regulatory role. REEs therefore, would largely be explored, mined, processed, and developed in the private sector. Unlike in India, most other jurisdictions treat REEs like any other mineral. Mineral exploration rights, and even the detailed mineral inventory information is largely in the private sector and government databases are often archival and outdated. Government to Government initiatives would therefore meet only with partial success.
Leveraging the large private sector networks of Diaspora and cultural soft power ties with support and encouragement by the government has a potential to create a huge and diversified supply chain network not just in the REE space but over the entire spectrum of strategic metals security for India. Indian missions in the Indian Ocean Region enjoy a huge goodwill in the Diaspora and have a potential to lead, coordinate and encourage such networks. Engaging with the few Indian owned companies that are already operating in this space and supporting them would be a major step in strategic metals security for India.