India Proposes Critical Minerals Partnership Agreement with the US to Boost Electric Vehicle Sector

India has proposed a critical minerals partnership agreement (CMPA) with the United States, aiming to benefit domestic firms in sectors like electric vehicles. This proposal was made by Commerce and Industry Minister Piyush Goyal during his recent visit to the US. The two nations also signed a memorandum of understanding (MoU) to enhance cooperation in the critical mineral supply chain.

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Critical minerals, including cobalt, copper, lithium, nickel, and rare earths, are essential for clean energy technologies like wind turbines and electric vehicles. These minerals are particularly important for manufacturing batteries for electric cars. The proposed CMPA could help Indian firms gain duty concessions and other benefits in the American market.

Focus on Critical Minerals

The CMPA is similar to a free trade agreement (FTA) but specifically targets the critical minerals sector. Last year, the US and Japan signed a similar agreement. The US provides benefits under its Inflation Reduction Act to American firms or those from countries with an FTA with the US. An official noted that converting the MoU into a partnership agreement would give it trade deal status, allowing India to benefit from the US electric vehicle tax credit.

During his visit, Goyal observed significant interest from US industries in investing in India across various sectors. He mentioned that one firm is considering investments of around USD 10 billion in areas like data centres and quantum computing for AI. Discussions also covered technology transfer and co-development of innovative ideas.

Investment and Collaboration

Goyal highlighted interest in co-developing new technologies, particularly in pharma, digital technology, and telecom sectors where India is focusing on 6G. US companies are also keen on biosimilars and bio-sciences. Goyal co-chaired the US-India CEO Forum meeting with US Secretary of Commerce Gina Raimondo during his visit.

The forum discussed reducing compliance burdens, decriminalising business laws, facilitating capital flow, and enhancing regulatory communication. There were no discussions on visa issues or work permits. Both sides aim to restructure the CEO forum to widen representation and include tourism elements.

Future Prospects

Goyal invited companies to establish Global Capability Centres (GCC) in India. He announced plans to open investment offices in New York and Silicon Valley with representatives from Invest India and the National Industrial Corridor Development Corporation (NICDC) to boost investments into India. Discussions on clean energy included green hydrogen and green ammonia.

The tenure of many forum members will end in December. Goyal emphasised that H1B visas are now historical issues. The proposed CMPA could pave the way for enhanced trade relations between India and the US, benefiting both nations' economies while promoting clean energy initiatives.