POLICY
Cabinet approves Rs 2,814 crore scheme for domestic critical mineral processing
The five-year scheme offers a 30 per cent capital subsidy to establish two lithium and two nickel processing facilities.
The Union Cabinet on Wednesday approved a Rs 2,814-crore capital expenditure support scheme to build domestic processing facilities for lithium and nickel, aiming to reduce India's heavy reliance on imported refined minerals.
The initiative, officially named the 'Capex support scheme to promote critical mineral processing', will run for five years from the financial year 2026-27 through 2030-31. It offers financial assistance to establish four processing units across the country—two dedicated to lithium and two to nickel—to convert raw ores and intermediary products into high-purity compounds.
What the Cabinet approved
Under the approved structure, the government will cover 30 per cent of the eligible capital expenditure required to build each facility. Total financial support is capped at Rs 500 crore per beneficiary for lithium projects and Rs 900 crore per beneficiary for nickel projects, bringing the overall budgetary outlay to Rs 2,814 crore.
Cobalt, another essential battery material, is expected to be recovered as a by-product during the nickel processing operations.
The table below outlines the core parameters for the four processing plants funded under the government scheme:
| Plant Parameter | Lithium Processing Facilities | Nickel Processing Facilities |
|---|---|---|
| Number of Plants | 2 | 2 |
| Minimum Capacity | 30,000 tonnes (30 kt) each | 50,000 tonnes (50 kt) each |
| Subsidy Level | 30% of eligible investment | 30% of eligible investment |
| Cap Per Beneficiary | Rs 500 crore | Rs 900 crore |
| Expected By-products | Not disclosed | Cobalt |
The government noted in its statement that India's domestic beneficiation and processing capacity remains constrained by steep upfront capital requirements, limited access to suitable technologies, and restricted raw material availability. The new subsidy framework is designed to address these structural barriers.
How selection and disbursements will work
Beneficiaries for the scheme will be chosen through a two-stage competitive process based on a least-cost selection model.
In the first stage, applicant companies will undergo a technical evaluation to assess their operational and technological capabilities. Only those that meet the government's technical threshold will move forward to the second stage.
The second stage involves financial bidding, where technically qualified candidates will compete based on the amount of capital expenditure support they request from the Centre. The government will select two beneficiaries for lithium and two for nickel, giving preference to applicants seeking the lowest subsidy payout per project.
Once awarded, the financial assistance will not be disbursed in a single lump sum. Instead, incentives will be released in three separate tranches tied directly to the achievement of specified project development milestones over the construction phase.
Why it matters for industry
For manufacturers operating in electric mobility, battery energy storage systems (BESS), semiconductors, and consumer electronics, domestic refining capacity represents a crucial missing link in India's industrial supply chain. While India has introduced production-linked incentive schemes for advanced chemistry cell batteries and electric vehicles, local battery chemical production remains heavily reliant on imported refined compounds.
Establishing commercial-scale domestic refining allows battery chemical suppliers and industrial equipment manufacturers to source high-purity inputs domestically, cutting shipping lead times, reducing currency risk, and building resilience against global supply disruptions.
Union Coal and Mines Minister G. Kishan Reddy said the scheme will strengthen domestic capabilities, boost manufacturing, and reduce dependence on imports. He noted in a social media post that the initiative will benefit key sectors including electronics, semiconductors, batteries, defence, heavy equipment, and machinery, while supporting industries across the manufacturing value chain.
Prime Minister Narendra Modi stated on social media that India cannot afford to depend on other countries for processing such critical materials, adding that the scheme would encourage domestic investment and secure future supplies.
Global context and import dependence
The push to build domestic refining capabilities comes amid extreme concentration in global critical mineral supply chains. China currently controls over 90 per cent of global processing capacity for several essential materials, including rare earth elements and battery-grade graphite.
This geographical concentration leaves international supply chains vulnerable to trade restrictions, geopolitical friction, export controls, and severe price volatility. India currently depends substantially on overseas suppliers for refined intermediates and high-purity mineral compounds required for modern manufacturing.
Without domestic processing units, raw ores extracted inside India or secured through overseas concessions must be shipped abroad for refining before they can be utilized in cell manufacturing or high-tech applications. The new policy aims to retain that processing value addition within national borders.
Industry reactions and raw material risks
The Federation of Indian Mineral Industries (FIMI) welcomed the government's announcement, noting that financial support could encourage fresh private investment, boost domestic value addition, and strengthen supply lines for battery production and strategic industries.
However, the industry body emphasized that physical processing infrastructure alone will not secure India's mineral supply chain. FIMI stated that securing a reliable supply of raw materials—through both domestic mining expansion and overseas sourcing—will be equally important for the processing facilities to operate successfully.
FIMI added that India needs a fully integrated approach that spans the entire value chain, from initial mining and exploration through to refining and chemical processing, to ensure long-term mineral security.
What happens next
The scheme will formally take effect from the start of the 2026-27 financial year and remain in force through FY2030-31.
The Ministry of Mines is expected to issue detailed bidding guidelines and open the application portal for the two-stage selection process ahead of the FY27 implementation. Companies bidding for the four plant slots will need to submit technical blueprints, source-material procurement plans, and capex requirement estimates to qualify for financial evaluation.