Regulatory Alert - Scheme for Capital Expenditure Assistance for Promotion of Critical Minerals Processing 

The Union Cabinet has approved the Scheme for Capital Expenditure Assistance for Promotion of Critical Minerals Processing (‘Scheme’) with a financial outlay of INR 2,814 crores. The Scheme is valid for a period of five years, commencing from FY 2026-27 to 2030-31.

The Scheme aims to provide targeted capital expenditure support for setting up and operationalisation of processing plants in the country, ultimately targeting to reduce the supply chain dependencies. The key activities targeted under the Scheme are to process lithium and nickel ores and intermediate products into high purity compounds. This will help in critical sectors such as electric mobility, battery energy storage system (BESS), electronics, defence, specialty steel, etc.

Incentives under the Scheme:
30% capital subsidy will be provided on eligible investment for setting up of four critical mineral processing plants, meeting the following capacity requirements:  

• Two lithium processing plants, each with a minimum capacity of 30,000 metric tonnes. Incentive capped at INR 500 crores for each entity.

• Two nickel processing plants, each with a minimum capacity of 50,000 metric tons. Incentive capped at INR 900 crores for each entity.

Selection Process:
The selection of beneficiaries under the scheme will be done through a two-stage process. 

• Technical eligibility - Only technically eligible applicants will be eligible to participate in the second stage of financial bidding.

• Financial eligibility - Two beneficiaries will be selected for each mineral based on the criteria of minimum cost, i.e., selection will be made on the basis of lowest capital expenditure support sought by the bidders.  

The incentives will be disbursed in three phases linked to achieving the set targets, which are as follows:

Tranche	Milestone	Cumulative Subsidy Released (% of Quoted Bid Amount)
1	25% of committed CAPEX spent, with at least 15% of minimum required equity contributed	25%
2	50% of committed CAPEX spent, with at least 50% of minimum required equity contributed	50%
3	Plant commissioned, with 100% of minimum required equity contributed	100%

Our Take
The Government of India launched the National Critical Mineral Mission with an aim to reduce import dependencies on the procurement of critical minerals, which form an integral part of the manufacturing ecosystem. While the current scheme focuses on critical mineral extraction from raw sources, the Government launched the Critical Minerals Recycling Scheme last year which aimed at extraction of critical minerals from recycling of existing, scrapped consumables in the ecosystem.

The idea has been tapped in every available source of critical mineral input available, and ultimately created a robust ecosystem for domestic availability of critical minerals.