India’s critical minerals sector faces financing constraints despite policy push: Report

May 12, 2026 | Press Releases

India’s critical minerals sector continues to face financing constraints despite policy initiatives aimed at strengthening domestic supply chains, according to a briefing note by the Institute for Energy Economics and Financial Analysis (IEEFA) and Climate and Sustainability Initiative (CSI).

The briefing note stated that volatile demand and supply conditions, sharp fluctuations in critical mineral prices, long gestation periods, and high upfront capital requirements are restricting capital flow into the sector.

The National Critical Mineral Mission (NCMM) seeks to create regulatory and institutional support for developing the supply chain, but focused capital expenditure will be necessary to accelerate large-scale mining, refining and processing activities.

The International Energy Agency estimates that around $915 billion of fresh global capital investment will be required for mining and refining activities between 2026 and 2035 under its Announced Pledges Scenario.

The note highlighted funding gaps across the supply chain, including upstream exploration and capital-intensive midstream processing operations, while underlining the importance of private investment and project de-risking mechanisms.

“The absence of risk-sharing capital, midstream capex support, and integration with manufacturing incentives is limiting private investment,” said Saloni Sachdeva Michael, Lead Energy Specialist, India Clean Energy Transition, at IEEFA.

The analysis identified high upfront costs, lengthy project timelines, and regulatory uncertainties as major deterrents for investors.

“Midstream bottlenecks like feedstock uncertainty, price volatility, and global overcapacity are discouraging investment in refining and processing,” said Kaira Rakheja, Energy Analyst at IEEFA.

 

The success of India’s critical minerals strategy also depends on scaling domestic manufacturing in sectors such as batteries, electric vehicles, solar modules, and electronics.

“The high concentration of critical mineral supply chains in a few countries, primarily China, means that India needs to diversify its sources and augment its domestic manufacturing capabilities,” says Rati Verma, a Research Consultant at CSI.

The briefing note added that India currently lacks a coherent strategy for financing and integrating domestic processing and refining capacity with mining activities. It also pointed to fragmented research and development linkages between academia, public sector units, and private industry.

While the NCMM addresses exploration, overseas asset acquisition, and recycling, linkages with Production Linked Incentive (PLI) schemes remain weak.

The analysis also highlighted the need for stronger Centre-state coordination with clearly defined institutional roles, shared project pipelines, and aligned incentives to accelerate project implementation.

It noted that Khanij Bidesh India Limited (KABIL) is pursuing overseas exploration and strategic acquisitions for minerals such as lithium and cobalt to strengthen India’s access to critical mineral resources.

The authors also stressed the importance of Environmental, Social and Governance (ESG) practices in reducing supply chain risks, including emissions, corruption, and conflict-linked sourcing.

“Global experience shows that Centre-state coordination, risk-sharing, and long-term policy clarity are essential for the sector’s progress,” says Labanya Prakash Jena, Director, CSI.
 
Originally published in The Economic Times – Energy World (Online).

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