India’s Critical Mineral Processing Scheme Explained: Lithium, Nickel and Batteries

Decision: On 4 November, the Union Cabinet cleared a ₹2,814 crore scheme to support investment in critical mineral processing over FY 2026–27 to FY 2030–31. Capital expenditure, or capex, is spending on long-lived assets such as processing plants and machinery.

Design details: The Indian Express reported before approval that the proposal envisaged a 30% subsidy on eligible investment and two lithium and two nickel plants, with cobalt potentially recovered during nickel processing. The reported plant thresholds and subsidy caps should be read as proposal details pending implementation guidelines.

Criticality: A mineral becomes critical when its economic or strategic uses are important and its supply can be disrupted. Criticality varies by country and can change as technology or available suppliers change. Lithium, nickel and cobalt are different from rare earth elements.

The value chain: Mining extracts ore. Beneficiation removes some unwanted material and raises the mineral concentration. Chemical processing and refining turn ores or intermediate products into high-purity compounds such as lithium hydroxide or nickel sulphate. Battery manufacturers then use suitable compounds to make active materials and cells.

Battery chemistry: Nickel-manganese-cobalt, or NMC, cathodes use nickel and cobalt. Lithium iron phosphate, or LFP, cathodes still need lithium but use iron and phosphate in place of nickel and cobalt. Nickel also has an important market in stainless steel. Refiners must plan for changing battery chemistries as well as demand from other industries.

Supply risk: A country may diversify where it buys ore and still depend on one country for refined chemicals. The International Energy Agency finds that refining has become more concentrated, with China dominant in several value chains and Indonesia especially important for nickel.

National mission: The National Critical Mineral Mission, approved in 2025, covers exploration, mining, processing, overseas sourcing and recovery from discarded products. The Centre has also supported processing parks and a separate recycling incentive. A park can share utilities, testing labs and waste-treatment infrastructure across firms.

Different risks: Overseas purchase agreements help secure feedstock. Refineries add conversion capacity. Recycling recovers material from batteries or other waste, while stockpiles provide a buffer during disruptions. A refinery in India can still depend on imported raw materials, specialised machinery or reagents.

Commercial viability: Plants need reliable feedstock, skilled staff, stable power and water, and buyers willing to qualify domestic output. Battery-grade specifications matter because impurities can reduce cell performance. Global price swings can make a new plant uncompetitive even after a subsidy.

Environmental safeguards: Processing can generate wastewater, chemical residues and other waste. Water budgeting, effluent treatment, residue tracking and credible monitoring should be built into project design.

A second source of material: Ore and mineral intermediates can feed conventional refineries. Used batteries and manufacturing scrap are secondary feedstock. Dismantling and shredding lithium-ion batteries can produce black mass, a powder containing recoverable battery materials. Further chemical separation is needed to obtain usable mineral compounds.

Separate policy instruments: The 2025 recycling incentive supports actual recovery of critical minerals from eligible waste streams. Producing black mass alone is insufficient for that incentive. Recycling can reduce demand for newly mined material as collection volumes grow, while long-lived batteries, collection gaps and different battery chemistries limit how much material can be recovered in the near term.

Test output as well as investment: Installed refinery capacity indicates how much a facility could produce under specified conditions. Actual output depends on feedstock, operating costs and demand. Useful measures include the share of capacity in use, the volume of product that meets buyers’ specifications and the diversity of raw material sources.

Track the remaining bottlenecks: An offtake agreement is a commitment to buy a future quantity of output under agreed terms. Such agreements can help refiners secure customers and buyers secure supplies. A domestic refinery can still be exposed to one foreign feedstock supplier, so assessing resilience also requires looking at sourcing, recycling and environmental compliance.