GS Paper - II

India is now formally a part of the Minerals Security Finance Network, a US-led initiative aiming to strengthen cooperation among members to secure supply chains for critical minerals. The announcement, made by the US State Department on the margins of the United Nations General Assembly, involved a pact entered by 14 countries and the European Union.

What

• The Minerals Security Finance Network (MSFN) is a new initiative that stems from the Minerals Security Partnership (MSP), a framework established by the US in 2022. India was inducted to the MSP in June 2023.
• The strengthening of the MSP with an additional offshoot in the MSFN comes at a time when there is an overwhelming dependence on countries such as China for critical resources, especially with respect to rare earth minerals.
• Under this new partnership, signatory nations acknowledged that the scope and scale of meeting the rapidly increasing global demand for critical minerals to achieve the proposed clean energy transition was “beyond the purview of any single institution” and that the public sector and private sector in member countries “would need to work together to deploy capital into new and existing markets in this sector”.
• This new partnership brings together DFIs (development finance institutions) and ECAs (export credit agencies) from the participating nations to “create synergies, and increase impact”.

Rare earth minerals

• The MSP grouping, industry insiders said, is focused on the supply chains of minerals such as cobalt, nickel, lithium and also the 17 “rare earth” minerals.
• While cobalt, nickel and lithium are required for batteries used in electric vehicles, rare earth minerals are critical, in trace amounts, in the semiconductors and high-end electronics manufacturing.
• China is a strong player in this space and has created processing infrastructure in rare earth minerals and has acquired mines in Africa for sourcing elements such as cobalt.
• Rare earth comprises 17 elements and are classified as light RE elements (LREE) and heavy RE elements (HREE).
• Some REs are available in India such as lanthanum, cerium, neodymium, praseodymium and samarium, while others such as dysprosium, terbium, europium that are classified as HREE are not available in Indian deposits in extractable quantities.
• Currently, there is an overwhelming dependence on countries such as China for HREE, which is one of the leading producers of RE with an estimated 70 per cent of the global production.
• India is seen as a late mover in attempts to enter the lithium value chain, coming at a time when EVs are predicted to be a sector ripe for disruption.