On March 26, 2015, amendments to the Mines and Minerals Development and Regulation (MMDR) Act marked India’s departure from First Come First Served —the global norm — to a system of auctions as the only method for granting exploration and mining licenses.
This new regime was introduced to increase transparency and objectivity in allocating mining rights. Since then, a total of 442 mineral blocks have been auctioned, but only 54 of these blocks are currently in production.
In June 2023, India’s official list of critical minerals was released, with the goal of developing domestic value chains for the minerals essential for national security and economic development.
The Ministry of Mines announced the first tranche of critical mineral auctions just four months later. Till now, four tranches of critical mineral auctions have been held, consisting of 48 blocks (a fifth tranche of critical minerals has been announced in January 2025 for 15 blocks).
Only 24 of these blocks have been successfully auctioned, while the rest were annulled due to a lack of qualified bidders. A 50 per cent success rate for critical mineral auctions, though very low, can still be argued as a positive result by some stakeholders.
More recently, the Cabinet announced the National Critical Minerals Mission where the first component is increasing domestic critical minerals production. Between FY 2024-25 and FY 2030-31 the government aims to undertake 1,200 exploration projects, auction 100 mineral blocks and allocate ₹7,000 crore for exploration.
However, the future of exploring and mining critical minerals faces various challenges.
The challenges
First, there has been a severe lack of critical mineral exploration by private companies. In 2023, Exploration Licenses (ELs) were introduced to incentivise the exploration of deep-seated and critical minerals. Since the introduction of ELs in 2023, 10 blocks across five States have been identified for granting licences.
However, all of them have been annulled due to a lack of bidders. The absence of effective incentives under ELs makes it harder for expert exploration companies to invest in these projects.
One of the main concerns of ELs, which are also granted through auctions, is that companies will receive returns on their investment only after a successfully discovered mine is auctioned and operationalised, which in some cases may take years.
Globally recognised exploration companies have not invested in India since the 2015 MMDR amendment, as, unlike other jurisdictions, the EL here does not provide explorers the right to mine.
The delays
Second, there are massive delays in the operationalisation of mines, leading to an unfavourable policy regime for investors. For critical minerals like graphite, phosphate and tin, 54 mining leases were auctioned (prior to the critical mineral auction tranches), but 34 of these are still not operational.
A leading factor for such delays is the complex and backlogged system for post-lease clearances. Every mining leaseholder must obtain certain statutory clearances like the Environmental, Forest and Wildlife Clearances, as well as a Consent to Operate. Different authorities issue these clearances at the State and Central levels.
While the statutory timeline for issuing all clearances is approximately 420 days, a majority of the clearances are not issued within this stipulated timeframe. For instance, the Ghoraburhani-Sagasahi iron ore mine, successfully auctioned in March 2016, began operations in April 2022 after receiving all its clearances. Strict norms for the timely issuance of clearances are essential for the sustainable development of natural resources, as delays in processing these clearances have led to the inefficient use of mineral resources.
Irrational bids
Third, irrationally high bids are unsustainable and have often led to delays in operationalisation. In the auction procedure, a company bids a premium on the value of the mined mineral. This premium will be paid to the respective state government on top of other statutory dues like royalties, DMF and NMET contributions, and corporate taxes.
The critical minerals auctions witnessed some of the highest bids ever for mining rights in India, with the highest at 752 per cent. The winning bid for 12 of the 24 critical mineral blocks was over 50 per cent. It may not be feasible even for captive mining companies to pay such high premiums and remain profitable, even if they are better equipped to absorb costs without raising the prices of processed minerals and metals downstream.
For example, JSW, one of India’s leading steel manufacturers, had successfully won the auction for the Jajang Iron Ore Block with a 110 per cent bid. The same was surrendered by the company in 2024 due to uneconomic operations and increasing downstream costs.
Fourth, several important mineral blocks were not successfully auctioned, including the much-discussed lithium block in Jammu and Kashmir. In fact, 50 per cent of the successful auctions were just for graphite, with very few other critical minerals allotted.
Lack of bidders
None of the rare earth mineral blocks were auctioned due to the lack of qualified bidders. And though India has significant resources of nickel, only two of the seven auctioned blocks were allocated. The lack of interested parties, either Indian or global, is a sign of concern for India’s domestic mineral development sector.
India is known for its vast mineral potential and geological similarities to Australia. Underutilisation of potential mineral resources of cobalt, lithium, nickel and rare earth minerals makes India import-dependent for its critical mineral requirements that are essential for its green transition targets.
The recent critical mineral auctions opened avenues for several experienced companies like Coal India, Vedanta and Hindustan Zinc to enter the sector.
However, there is still no global participation in the Indian mining sector, which would bring in skills and technologies to develop and process critical minerals.
Since mining critical minerals is more challenging and capital-intensive than traditional minerals, the existing auction system may not be conducive to incentivising their extraction.
Policymakers must address these challenges to attract investments and create a stronger domestic value chain.
Bansal is Research Associate and Sivamani is Associate Fellow Centre for Social and Economic Progress (CSEP), New Delhi. The views expressed are personal
