Cabinet Approves CAPEX Support Scheme for Critical Mineral Processing: ₹2,814 Crore Push for Lithium and Nickel Self-Reliance

Why in News

The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the CAPEX Support Scheme to Promote Critical Mineral Processing on 4 November 2026. The scheme carries a total financial outlay of ₹2,814 crore over five years (FY 2026-27 to FY 2030-31) and aims to establish domestic processing infrastructure for lithium and nickel — two minerals critical for electric vehicles (EVs), energy storage, and advanced electronics.

Background

India imports nearly all of its processed lithium and a large share of refined nickel, creating a strategic vulnerability in the clean-energy transition. As the country pushes toward 500 GW of non-fossil fuel capacity by 2030 and a substantial EV fleet under the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme, demand for critical minerals has surged.

The Mines and Minerals (Development and Regulation) Amendment Act, 2023 first listed critical minerals explicitly and empowered the central government to auction them. Separately, the Critical Minerals Mission was launched in 2024 to identify, acquire, process, and recycle critical minerals across the value chain. The CAPEX Support Scheme operationalises the processing pillar of that Mission.

Timeline

• 2023: MMDR Amendment Act; first Critical Minerals list of 30 minerals notified.
• 2024: Critical Minerals Mission announced; first overseas mineral block acquisitions (Australia, Argentina, Chile) under KABIL (Khanij Bidesh India Ltd.).
• 2025: PM E-DRIVE scheme launched; battery demand projections revised upward.
• 4 November 2026: Cabinet approves CAPEX Support Scheme for Lithium and Nickel processing.

Current Developments

The Cabinet note released by the Ministry of Mines specifies that the scheme will fund four critical mineral processing plants — two for lithium and two for nickel — through capital subsidies. The scheme offers a 30% capital subsidy on eligible investment, capped at ₹500 crore per lithium processing plant and ₹900 crore per nickel processing plant.

Minimum capacity thresholds are set to ensure scale viability: each lithium plant must handle at least 30,000 tonnes (30 kilotonnes) per annum, and each nickel plant at least 50,000 tonnes (50 kilotonnes) per annum.

The scheme is expected to mobilise total investment of approximately ₹10,000 crore from the private sector, leveraging each rupee of public capital expenditure support into roughly ₹3.5 of private investment.

Key Facts

• Scheme name: CAPEX Support Scheme to Promote Critical Mineral Processing
• Cabinet approval: 4 November 2026
• Financial outlay: ₹2,814 crore (central government)
• Duration: FY 2026-27 to FY 2030-31 (5 years)
• Minerals covered: Lithium and Nickel
• Plants supported: 4 total (2 lithium + 2 nickel)
• Capital subsidy rate: 30% of eligible investment
• Per-beneficiary cap: ₹500 cr (lithium); ₹900 cr (nickel)
• Minimum capacity: 30 ktpa (lithium); 50 ktpa (nickel)
• Expected private investment: ~₹10,000 crore
• Implementing ministry: Ministry of Mines

Constitutional Provisions

Mineral development falls under Entry 54, List I (Union List), Seventh Schedule of the Constitution, giving Parliament exclusive legislative competence over "regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest." The Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) is the primary statute flowing from this entry.

The scheme also engages Article 39(b) (Directive Principle) — that the material resources of the community are distributed to serve the common good — and Article 48A (Fundamental Duty of the State to protect the environment), since critical mineral processing infrastructure is key to India's clean-energy transition.

Legal Framework

• Mines and Minerals (Development and Regulation) Act, 1957 — primary statute; amended in 2015, 2021, and 2023 to list critical minerals and facilitate expedited auction.
• MMDR Amendment Act, 2023 — inserted Section 17A(2A) empowering the Centre to undertake prospecting and mining operations for critical minerals; introduced the concept of a "critical mineral" for the first time in statute.
• Atomic Minerals Concession Rules, 2016 — govern lithium exploration insofar as lithium is not an atomic mineral but rules interact with boundary definitions.
• Essential Commodities Act, 1955 — may apply to downstream processed mineral products in supply-crunch scenarios.

Institutional Framework

• Ministry of Mines — nodal ministry for scheme design and implementation oversight.
• KABIL (Khanij Bidesh India Ltd.) — joint venture of NALCO, HCL, and MECL for overseas critical mineral acquisition.
• Geological Survey of India (GSI) — mineral exploration and block delineation.
• MECL (Mineral Exploration and Consultancy Ltd.) — exploration support.
• NITI Aayog — policy coordination; published the Critical Minerals for India report (2023) recommending supply-chain diversification.
• IEA (International Energy Agency) / MSP (Minerals Security Partnership) — India joined the US-led MSP in 2022, committing to transparent critical mineral supply chains.

Economic Dimensions

India's import bill for processed lithium compounds (e.g., lithium carbonate, lithium hydroxide) and refined nickel runs into thousands of crores annually. Building domestic capacity will reduce this outflow and improve the current account deficit. Processed critical minerals also have high value-addition potential: lithium carbonate used in battery cathodes commands significant premium over raw ore.

The ₹10,000 crore private investment expected under the scheme will generate direct manufacturing employment and create backward linkages to mining operations and forward linkages to battery cell and pack manufacturing. The scheme complements the Production Linked Incentive (PLI) scheme for Advanced Chemistry Cells (ACC) (₹18,100 crore), which supports battery manufacturing but not upstream mineral processing.

Banking & Financial Angle: The scheme creates a fresh credit demand window for public-sector banks financing critical mineral processing plants. NABARD and SIDBI may be roped into co-financing SME-scale ancillary units. The capital subsidy reduces financial risk for lenders, improving project creditworthiness and opening sovereign-backed partial credit guarantees.

Environmental Dimensions

Critical minerals — particularly lithium and nickel — are foundational to the clean-energy transition. Domestic lithium processing supports a viable EV ecosystem without dependence on imports from Chile, Argentina, and Australia. This aligns with India's Nationally Determined Contribution (NDC) target of 500 GW non-fossil capacity and net-zero by 2070.

However, mineral processing plants generate liquid effluents and solid waste. The scheme must enforce compliance with the Environment Protection Act, 1986, Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016, and applicable Pollution Control Board norms to prevent localised ecological damage.

International Relations

India's critical mineral strategy situates it within competing global supply chains. China dominates global lithium and nickel processing (processing ~60% of world lithium and ~35% of nickel). By developing domestic capacity, India reduces geopolitical exposure. The scheme directly supports India's commitments under the Minerals Security Partnership (MSP) and aligns with Quad-level critical mineral cooperation frameworks with the US, Australia, and Japan.

Free Trade Agreements — such as the India-Australia ECTA — give India preferential access to Australian lithium ore, which domestic plants could process. KABIL's acquisitions in Argentina (lithium brine) and Chile provide feedstock security.

Challenges

• Technology gap: Commercial-scale lithium hydroxide and nickel sulfate processing is dominated by a few global players; India must licence or develop competitive process technology.
• Feedstock security: Domestic lithium reserves (Salal, J&K; Reasi district) are still under exploration; overseas supply chains are nascent.
• Environmental compliance: Processing plants use acidic reagents and generate hazardous waste; regulatory capacity must be built alongside industrial capacity.
• Skilled labour: Hydrometallurgical and pyrometallurgical processing requires specialised engineers and technicians currently in short supply.
• Price volatility: Global lithium prices have been volatile (peak 2022, trough 2024); ROI projections for plant investors may shift materially.

Government Initiatives

• Critical Minerals Mission (2024) — umbrella policy for end-to-end critical mineral value chain development.
• KABIL (est. 2019) — overseas mineral block acquisition in Argentina, Australia, Chile.
• PLI-ACC (₹18,100 crore) — incentivises battery cell manufacturing; complementary to this scheme.
• PM E-DRIVE Scheme — EV adoption push creating downstream demand pull.
• MMDR Amendment Act, 2023 — legislative enabler for expedited critical mineral auctions.
• National Green Hydrogen Mission (₹19,744 crore) — creates nickel demand for electrolysers.

Way Forward

The NITI Aayog's Critical Minerals Report (2023) recommends a mine-to-market approach integrating exploration, extraction, processing, and recycling. The CAPEX scheme addresses the processing gap but policymakers must also:

• Accelerate block auctions under MMDR to provide domestic feedstock.
• Develop a Critical Minerals Recycling Policy (battery recycling already mandated under the Battery Waste Management Rules, 2022) to create a secondary supply loop.
• Link the scheme to the National Industrial Corridor Development Programme for co-located processing clusters.
• Establish a Technology Development Fund for indigenising hydrometallurgical processes (recommendation aligned with the Parliamentary Standing Committee on Mines, 2024 report).

Possible Mains Questions

1. "India's Critical Minerals Mission is necessary but not sufficient to secure supply chain sovereignty in the clean-energy transition." Critically examine with reference to the CAPEX Support Scheme. (GS-III, 250 words)
2. Discuss the constitutional, legislative, and institutional framework governing critical mineral development in India. How does the MMDR Amendment Act, 2023 strengthen this framework? (GS-II/III, 250 words)

Possible Prelims MCQs

1. Q. With reference to the CAPEX Support Scheme (2026) for Critical Mineral Processing, which of the following statements is/are correct?
   1. The scheme offers a 30% capital subsidy on eligible investment.
   2. The scheme covers cobalt and manganese in addition to lithium and nickel.
   3. The financial outlay is ₹2,814 crore over five years.
   Options: (a) 1 and 3 only (b) 2 and 3 only (c) 1, 2 and 3 (d) 1 only
   Answer: (a) — The scheme covers only lithium and nickel; cobalt and manganese are not part of this scheme.
2. Q. The Critical Minerals list in India was first introduced through which legislative instrument?
   Options: (a) MMDR Act, 1957 as originally enacted (b) MMDR Amendment Act, 2015 (c) MMDR Amendment Act, 2023 (d) National Mineral Policy, 2019
   Answer: (c) — The MMDR Amendment Act, 2023 introduced the concept of a "critical mineral" for the first time in statute.

Essay Dimensions

1. Mineral sovereignty as the new frontier of geopolitical competition.
2. Can India leapfrog to clean-energy leadership without supply-chain self-reliance?
3. The paradox of environment-friendly technologies requiring environmentally intensive mineral extraction.
4. Industrial policy in the 21st century: capital subsidies, strategic autonomy, and WTO discipline.
5. KABIL and India's overseas mineral strategy: resource nationalism versus cooperative multilateralism.

Interview Questions

1. How does the CAPEX Support Scheme differ from the PLI scheme for Advanced Chemistry Cells? Do they overlap or complement each other?
2. What is the Minerals Security Partnership, and what obligations does India's membership entail?
3. India has significant lithium deposits in J&K. Why is an overseas acquisition strategy still necessary?
4. How would you design an environmental safeguard framework for large-scale critical mineral processing plants?
5. What is the geopolitical risk India faces if it remains dependent on China for processed lithium and nickel?

FAQ

What is the difference between a critical mineral and a strategic mineral?

A critical mineral is one with high economic importance and significant supply-chain risk (e.g., lithium, cobalt, rare earths). A strategic mineral is broader — any mineral important to national security, which may include critical minerals plus others like uranium or thorium. India's MMDR Act, 2023 uses the term "critical mineral."

Why are lithium and nickel prioritised in this scheme?

Lithium is the core material for lithium-ion battery cathodes and electrolytes used in EVs and grid storage. Nickel enhances battery energy density in NMC (Nickel-Manganese-Cobalt) cathodes and is used in stainless steel and green hydrogen electrolysers. Both are on India's Critical Minerals list and have zero domestic processing capacity currently.

What is KABIL?

KABIL (Khanij Bidesh India Ltd.) is a joint venture of three public-sector undertakings — NALCO (National Aluminium Company), HCL (Hindustan Copper Ltd.), and MECL (Mineral Exploration & Consultancy Ltd.) — set up in 2019 to acquire, develop, and process critical mineral assets overseas to ensure a reliable supply of critical minerals to India.

Further Reading

• PIB Press Release: Cabinet approves CAPEX Support Scheme (pib.gov.in)
• NITI Aayog: Critical Minerals for India (2023) — niti.gov.in
• Ministry of Mines: Critical Minerals Mission overview — mines.gov.in
• MMDR Amendment Act, 2023 — indiacode.nic.in
• IEA: Critical Minerals Market Review — iea.org