Customs Duty Waiver on Critical Minerals to Boost India's Domestic Industries

The exemption of customs duty on critical minerals is expected to make India a cost-competitive hub for lithium-based cathode material. This move will enable domestic players to access these minerals at competitive rates, experts noted on Tuesday.

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Finance Minister Nirmala Sitharaman announced the waiver of customs duty on 25 critical minerals, including lithium, copper, and nickel. Additionally, the import tariff on two minerals, including graphite, was reduced. This decision is seen as a significant step towards supporting India's mineral requirements.

Impact on Lithium-Ion Battery Manufacturing

Anurag Choudhary, CMD & CEO of Himadri Speciality Chemical Ltd, highlighted the importance of waiving customs duty on lithium. He stated, "The waiving off of customs duty on lithium is a milestone in the mission to locally manufacture lithium-ion battery for electric vehicles." Lithium is crucial for developing cathode-active material, which makes up 50-55% of cell costs.

Rakesh Surana, Partner at Deloitte India, praised the full exemption of customs duties on 25 critical minerals and the reduction of Basic Customs Duty (BCD) on two others. He said this would allow Indian industries to access these minerals at competitive prices, meeting current mineral needs effectively.

Reduction in Import Tariffs

Critical minerals such as antimony, beryllium, bismuth, cobalt, copper, gallium, germanium, hafnium, indium, lithium, and nickel previously attracted BCD ranging from 2.5% to 10%. These duties have now been reduced to zero. For graphite and silicon quartz/silicon dioxide, which had import tariffs of 5% and 7.5%, respectively, the customs duty has been lowered to 2.5%.

Critical minerals like copper, lithium, nickel, cobalt, and rare earth elements are essential components in many rapidly growing clean energy technologies. These include wind turbines and electricity networks as well as electric vehicles. The reduction in tariffs is expected to boost the availability of these essential materials.

Boosting Domestic Mining

India remains a net importer of critical minerals. To promote domestic mining activities, the mines ministry passed the Mines and Minerals Development & Regulation Amendment Bill 2023 last year. This bill allows for the awarding of exploration licences for deep-seated and critical minerals.

The recent changes in customs duties are anticipated to support India's ambitions in clean energy technology by ensuring a steady supply of essential materials at competitive prices. This move aligns with India's broader goals of enhancing its manufacturing capabilities and reducing dependency on imports.