India's Cabinet approves Rs 2,814 crore subsidy for lithium and nickel processing

What the Cabinet approved

The Union Cabinet on Wednesday approved a Rs 2,814 crore scheme to provide 30% capital subsidies for four lithium and nickel processing plants, the Indian Express reported. The scheme aims to establish an ecosystem for lithium and nickel processing and to strengthen India's domestic critical mineral value chain. Two plants will process lithium at a minimum capacity of 30 kilotonnes each, and two will process nickel at 50 kilotonnes each. The support is tied to capital expenditure, not to production or sales. The scheme is focused on processing plants, not mining.

Each lithium beneficiary can receive at most Rs 500 crore, and each nickel beneficiary at most Rs 900 crore. At those caps, the four awards would total Rs 2,800 crore, almost the entire outlay and Rs 14 crore less than the scheme's size. The caps are maximums, not guaranteed awards. Nickel plants have a higher minimum capacity and a higher cap than lithium plants; the nickel cap is 80% larger. The lithium cap is 56% of the nickel cap.

The scheme is expected to support electric mobility, battery energy storage systems, electronics, defence and speciality steel, according to the report.

Why India is paying

India has little processing capacity for critical minerals and is almost 100% import-dependent for some key minerals, including cobalt, lithium, nickel, rare earth elements and silicon. China controls 90% of global critical mineral processing and often uses that position during trade tensions, the Indian Express reported. India remains vulnerable to supply disruptions, and the scheme is meant to address that vulnerability. The import dependence reflects India's limited processing capacity.

The stakes are global. Carbon Copy reported that the critical minerals trade was worth $2.5 trillion in 2023, that demand for several minerals is expected to quadruple over the coming decades, and that processing capacity, not just reserves, shapes who captures value from the trade. That makes processing the bottleneck between mineral reserves and manufactured goods.

Refining alone has limits. Foreign Affairs reported that refining facilities need a steady supply of raw ore, that building a mine takes roughly 20 years, and that investing in refining is necessary but insufficient without new mines; it also reported that Japan cut its reliance on China for rare earths from about 90% to between 65% and 70% after 15 years of investment, following China's 2010 export block. The Japan example shows how long it takes to shift supply chains even with sustained investment.