Daily Current Affairs 11.10.2022 (How Xi remade China’s Party-State, Throttled at the grass roots: how to strengthen decentralised governance, Fed ex-Chair Ben Bernanke shares Nobel with 2 other U.S. economists, Russia’s continued defiance of international law, The ‘October surprise’ and the November election, Building resilient mineral supply chains)

Daily Current Affairs 11.10.2022 (How Xi remade China’s Party-State, Throttled at the grass roots: how to strengthen decentralised governance, Fed ex-Chair Ben Bernanke shares Nobel with 2 other U.S. economists, Russia’s continued defiance of international law, The ‘October surprise’ and the November election, Building resilient mineral supply chains)


1. How Xi remade China’s Party-State

While Xi Jinping’s rapid accumulation of power through various policies such as a strict anti-corruption campaign and a remake of the Party-State system may have brought him firm unchallenged control, it has removed any and all space for dissent

Since taking over the reigns of the Party in 2012 at the Communist Party of China’s (CPC) 18th Congress, Mr. Xi appears to have been in a hurry to refashion Chinese politics to define his era. When the CPC, last year, passed its third “historical resolution” in its 100-year history — the first in four decades — it noted that when Mr. Xi took over, he “solved many tough problems that were long on the agenda but never resolved and accomplished many things that were wanted but never got done.”

Key to Mr. Xi’s rapid accumulation of power was an anti-corruption campaign that was launched immediately after he took over. It laid down strict rules for Party members, which was welcomed by a weary public that had seen CPC officials amass vast fortunes. The Party-State division and system of parallel governance which was designed to professionalise governance, was collapsed by Mr. Xi through his 2018 reforms which declared that the “Party is the highest force for political leadership.”

Along with the overhaul of the political system was the reform of the People’s Liberation Army (PLA) — the biggest of all fiefdoms — which all of Mr. Xi’s predecessors, going back to Deng, had failed to do.

Ananth Krishnan

At the time of Xi Jinping’s ascension in 2012 at the Communist Party of China’s (CPC) 18th Congress, a vigorous debate was playing out in the pages of Communist Party newspapers between the party’s ‘Left’ and ‘Right’ factions, each arguing for a different direction in the country’s politics.

For the Mao-inspired Left, decades of Deng Xiaoping’s reforms had only brought inequality and ideological confusion. It was time, they argued, to go back to the first principles. For those on the pro-market Right, the leadership change was an opportunity to finally push for stalled political reforms, and rule China not by Party power but by law and the constitution. Mr. Xi, the son of a reformist former Vice Premier, was their great hope.

Fast forward a decade, and the Party media is a very different beast. Some pro-reform outlets have been shut down and others have had their leadership replaced. Neo-Maoists have maintained a careful silence, breaking it only to praise the current helmsman. Indeed, there is no longer a discernible Left or Right faction, at least in public. Everything begins and ends, as editorials seem to declare on a daily basis, with Xi Jinping.

The New Era

In recent days, many of the bridges that cross high above Beijing’s ring roads have been decked in long, red banners hailing a “new era” in China’s development. For anyone living in China this past decade, the phrase “new era” (or “xin shidai”) immediately connotes one thing: it means the Xi era, which began in 2012.

Since taking over, Mr. Xi appears to have been in a hurry to refashion Chinese politics to define his era. As he opens the CPC’s 20th Party Congress this week, he presides over a political landscape that is almost unrecognisable to what he saw when he took over in the midst of an unprecedented political scandal which embarrassed the party, involving the corrupt former Politburo member — and once Xi’s rival — Bo Xilai and his wife’s murder of a British businessman. When the CPC, last year, passed its third “historical resolution” in its 100-year history — the first in four decades — it alluded to this sense of crisis, noting that when Mr. Xi took over “previously lax and weak governance has enabled inaction and corruption to spread within the Party and led to serious problems in its political environment, which had harmed relations between the Party and the people and between officials and the public, weakened the Party’s creativity, cohesiveness, and ability, and posed a serious test to its exercise of national governance.” Mr. Xi, it declared, “solved many tough problems that were long on the agenda but never resolved and accomplished many things that were wanted but never got done.”

Indeed, the party’s sense of existential crisis at the 2012 transition played to Mr. Xi’s advantage, who was given the mandate by the party’s elders to keep the ship afloat. However, the former leaders who gave him carte blanche to clean the rot got much more than they bargained for.

The policies of Xi

Key to Mr. Xi’s rapid accumulation of power was an anti-corruption campaign that was launched immediately after he took over. It laid down strict rules for Party members, which was welcomed by a weary public that had seen CPC officials amass fortunes. At the same time, it also neatly eliminated all of Mr. Xi’s rivals. This gave him the political space to embark on a massive restructuring of the Party-State, which was completed in 2018, when the CPC unveiled an entirely new governance structure that, for the first time in decades, brought Party organs out of the shadows and placed them firmly in charge of the State bureaucracy.

Also gone was the “collective leadership” model put in place after Deng, that saw a division of responsibilities in the top Politburo Standing Committee. The Premier was no longer given the reins of the economy, and was left to preside over a diminished State bureaucracy.

The Party-State division and system of parallel governance was designed to professionalise governance, particularly in running the economy. Mr. Xi collapsed that division, and his 2018 reforms declared that the “Party is the highest force for political leadership.” Central leading groups that in the past held little sway over how the State executed policy were upgraded to “commissions”. A new National Supervisory Commission was created to take over all anti-corruption work — the tip of Mr. Xi’s spear.

The Central Commission for Comprehensively Deepening Reform, headed by Mr. Xi, displaced the bureaucrats of the State Council as the leading policy-making body, just as the Central Financial and Economic Affairs Commission and Central Foreign Affairs Commission asserted control over economic and diplomatic policies.

The main goal was to end “fiefdoms” that emerged in the Jiang Zemin and Hu Jintao areas and put the party — and its “core” leader — in charge of all domains. The civil service — a state within a state — was similarly brought directly under the Central Organisation Department which now handles both Party and State. The Party’s secretive Central United Front Work Department was placed in charge of running all religious and ethnic affairs, earlier managed by State commissions.

Cleaning up the army

Along with the overhaul of the political system was the reform of the People’s Liberation Army (PLA) — the biggest of all fiefdoms — which all of Mr. Xi’s predecessors, going back to Deng, had failed to do. Here too, the anti-corruption campaign, which struck fear in the Generals after Xi purged the PLA’s two highest-ranking Generals who had been accused of running a “pay for post” military, allowed Mr. Xi to carry out what the PLA Daily described as “the largest scale military reform since the 1950s”. The reforms ended the Soviet-style General Staff Departments, disbanding four vast bureaucracies handling staff, politics, logistics and armaments and bringing them under the direct control of the Central Military Commission. Seven sprawling military commands were consolidated into five theatre commands with a focus on jointness between forces.

Mr. Xi’s remaking of the Party-State may have brought him firm unchallenged control but has removed any and all space for dissent. At the same time, it has also raised the stakes for China’s leader as the country deals with a slowing economy and an unpopular “zero-COVID” regime at home, coupled with what many in Beijing see as an increasingly unfavourable environment abroad. If the party’s successes in dealing with these challenges may, as its media reminds, rest on Mr. Xi, so will its failures.

This the first article of a three-part series looking at China’s changing politics, economy and diplomacy in the Xi decade.

2. Throttled at the grass roots: how to strengthen decentralised governance

Local governments remain hamstrung and ineffective — mere agents to do the bidding of higher-level governments. To curb these tendencies, gram sabhas and wards committees in urban areas have to be revitalised

Its been 30 years since the 73rd amendment, which envisages a three tier Panchayat Raj System at the village, intermediate and district levels, was tabled in Parliament. This article by T.R. Raghunandan on September 9, 2019, talks about the failings of decentralisation and what must be done to revitalise gram sabhas and local government.

Democratic decentralisation is barely alive in India. Over 25 years after the 73rd and 74th constitutional amendments (they mandated the establishment of panchayats and municipalities as elected local governments) devolved a range of powers and responsibilities and made them accountable to the people for their implementation, very little and actual progress has been made in this direction. Local governments remain hamstrung and ineffective; mere agents to do the bidding of higher level governments. Democracy has not been enhanced in spite of about 32 lakh peoples’ representatives being elected to them every five years, with great expectation and fanfare.

The ground report

Devolution, envisioned by the Constitution, is not mere delegation. It implies that precisely defined governance functions are formally assigned by law to local governments, backed by adequate transfer of a basket of financial grants and tax handles, and they are given staff so that they have the necessary wherewithal to carry out their responsibilities. Above all, local governments are to report primarily to their voters, and not so much to higher level departments.

Yet, none of this has happened, by a long shot. Where did we go wrong? Was the system designed to fail?

The Constitution mandates that panchayats and municipalities shall be elected every five years and enjoins States to devolve functions and responsibilities to them through law. This is regarded as a design weakness, but on closer look, is not one. Given diverse habitation patterns, political and social history, it makes sense to mandate States to assign functions to local governments. A study for the Fourteenth Finance Commission by the Centre for Policy Research, shows that all States have formally devolved powers with respect to five core functions of water supply, sanitation, roads and communication, streetlight provision and the management of community assets to the gram panchayats.

Key issues

The constraint lies in the design of funding streams that transfer money to local governments. First, the volume of money set apart for them is inadequate to meet their basic requirements. Second, much of the money given is inflexible; even in the case of untied grants mandated by the Union and State Finance Commissions, their use is constrained through the imposition of several conditions. Third, there is little investment in enabling and strengthening local governments to raise their own taxes and user charges. The last nail in the devolution coffin is that local governments do not have the staff to perform even basic tasks. Furthermore, as most staff are hired by higher level departments and placed with local governments on deputation, they do not feel responsible to the latter; they function as part of a vertically integrated departmental system.

If these structural problems were not bad enough, in violation of the constitutional mandate of five yearly elections to local governments, States have often postponed them. In 2005, when the Gujarat government postponed the Ahmedabad corporation elections, a Supreme Court constitutional bench held that under no circumstances can such postponements be allowed. Subsequently, the Supreme Court rejected other alibis for election postponement, such as delays in determining the seat reservation matrix, or fresh delimitation of local government boundaries. Yet, in Tamil Nadu, panchayat elections have not been held for over two years now, resulting in the State losing finance commission grants from the Union government.

Downside of centralisation

Successive Union governments have made a big noise about local involvement in a host of centrally designed programmes, but this does not constitute devolution. Indeed, the current Union government has further centralised service delivery by using technology, and panchayats are nothing more than front offices for several Union government programmes. The beaming of homilies over the radio to captive audiences of local government representatives does nothing to strengthen local governments.

Union programme design for cities is inimical to decentralisation. The ‘Smart City’ programme does not devolve its funds to the municipalities; States have been forced to constitute ‘special purpose vehicles’ to ring fence these grants lest they are tainted by mixing them up with municipality budgets. There cannot be a greater travesty of devolution.

Sadly, except for a few champions of decentralisation in politics and civil society, people do not distinguish the level of government that is tasked with the responsibility of delivering local services. Therefore, there is no outrage when the local government is shortchanged; citizens may even welcome it.

On corruption

Are local governments as corrupt as they are alleged to be? Doubtless, criminal elements and contractors are attracted to local government elections, tempted by the large sums of money now flowing to them. They win elections through bribing voters and striking deals with different groups. Furthermore, higher officers posted at the behest of Members of Legislative Assemblies, often on payment of bribes, extract bribes from local governments for plan clearances, approving estimates and payments. Thus, a market chain of corruption operates, involving a partnership between elected representatives and officials at all levels. Yet, there is no evidence to show that corruption has increased due to decentralisation. Decentralised corruption tends to get exposed faster than national or State-level corruption. People erroneously perceive higher corruption at the local level, simply because it is more visible.

To curb these tendencies, first, gram sabhas and wards committees in urban areas have to be revitalised. The constitutional definition of a gram sabha is that it is an association of voters. Because of our erroneous belief that the word ‘sabha’ means ‘meeting’, we try to regulate how grama sabha meetings are held and pretend that we are strengthening democracy. Cosmetic reforms of the gram sabha by videography of their meetings, does little for democracy. Consultations with the grama sabha could be organised through smaller discussions where everybody can really participate. Even new systems of Short Message Services, or social media groups could be used for facilitating discussions between members of a grama sabha. Second, local government organisational structures have to be strengthened. Panchayats are burdened with a huge amount of work that other departments thrust on them, without being compensated for the extra administrative costs. Local governments must be enabled to hold State departments accountable and to provide quality, corruption free service to them, through service-level agreements.

Third, we cannot have accountable GPs, without local taxation. Local governments are reluctant to collect property taxes and user charges fully. They are happy to implement top-down programmes because they know that if they collect taxes, their voters will never forgive them for misusing their funds. The connection between tax payment and higher accountability is well known, but we wish to ignore these lessons.

India’s efforts in decentralisation represent one of the largest experiments in deepening democracy. Decentralisation is always a messy form of democracy, but it is far better than the operation of criminal politicians at the higher level who appropriate huge sums of tax-payer money, without any of us having a clue. We can keep track of corrupt local government representatives; at the higher level, we will never know the extent of dirty deals that happen. We have given ourselves a reasonably robust democratic structure for local governance over the last two decades and more. It is for us to give life to this structure, through the practice of a robust democratic culture. If we do not tell our higher level governments to get off our backs so that we can better govern ourselves, they will not. It is as important to tell higher level governments to stay away as it is for us to hold our local governments to account.

3. Fed ex-Chair Ben Bernanke shares Nobel with 2 other U.S. economists

Former U.S. Federal Reserve Chair Ben Bernanke, who put his academic expertise on the Great Depression to work reviving the American economy after the 2007-2008 financial crisis, won the Nobel Prize in economic sciences along with two other U.S.-based economists for their research into the fallout from bank failures.

Mr. Bernanke was recognised on Monday along with Douglas W. Diamond and Philip H. Dybvig. The Nobel panel at the Royal Swedish Academy of Sciences in Stockholm said the trio’s research had shown “why avoiding bank collapses is vital.”

With their findings in the early 1980s, the laureates laid the foundations for regulating financial markets, the panel said.

“Financial crises and depressions are kind of the worst thing that can happen to the economy,” said John Hassler of the Committee for the Prize in Economic Sciences.

“These things can happen again. And we need to have an understanding of the mechanism behind those and what to do about it. And the laureates this year provide that,” he added.

Danger of bank runs

Mr. Bernanke, 68, who was Fed chair from early 2006 to early 2014 and is now with the Brookings Institution in Washington, examined the Great Depression of the 1930s, showing the danger of bank runs — when panicked people withdraw their savings — and how bank collapses led to widespread economic devastation.

Mr. Diamond, 68, based at the University of Chicago, and Mr. Dybvig, 67, who is at Washington University in St. Louis, showed how government guarantees on deposits can prevent a spiraling of financial crises.

4. Editorial-1: Russia’s continued defiance of international law

Despite widespread global condemnation, including a resolution in March 2022 adopted by 141 countries in the United Nations General Assembly (UNGA) demanding that Russia immediately and unconditionally withdraw from Ukraine, Moscow brazenly continues with its illegal military offensive against Kyiv. The resolutions by UNGA are not binding, but decisions by the International Court of Justice (ICJ) are. On Ukraine’s application, the ICJ, in a provisional measure ruling, again in March, ordered Russia to immediately suspend its military operations in Ukraine. Russia has not complied with this decision. In the meanwhile, Russian troops in Ukraine have been accused of indulging in war crimes under international humanitarian law. Ukraine is not only fighting a brave military battle to defend its sovereignty but is also using all possible levers under international law against Russia. It has moved international courts such as the ICJ, the International Criminal Court, and the European Court of Human Rights to put Russia in the dock. But nothing seems to dissuade Russian President Vladimir Putin’s revisionist and imperial designs. Mr. Putin is willing to go to great lengths to resurrect a Russian empire and attain mythical civilisational greatness even if that means striking at the very foundations of the post-war international legal order assiduously built on core values such as sovereignty and non-intervention.

Illegal annexation

The newest item added to the long Russian list of barefaced violations of international law is the recent annexation of Donetsk, Luhansk, Zaporizhzhia, and Kherson — the four regions that are an integral part of Ukraine. Russia claims that these regions have had referendums and decided to join Russia. United Nations Secretary-General António Guterres has rightly pointed out that the so-called “referenda” in Ukraine were conducted in areas that are under Russian occupation. Thus, it is highly unlikely that the so-called referendums constitute a genuine expression of the popular will of the people.

To somehow prove the legitimacy of his actions to the Russian people, Mr. Putin frequently invokes the UN Charter. Just before invading Ukraine, he referred to Article 51 of the UN Charter (which provides for self-defence against an armed attack). Mr. Putin was wrong since Russia faced no aggression from Ukraine. In his recent speech announcing the illegal annexations, he referred to Article 1 of the Charter. The reference particularly was to the right of self-determination of the people of these regions. Mr. Putin is wrong again. The contours of the right of self-determination under international law are debatable. This right, also provided in Article 1 of the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights, provides that a group of people can freely determine their political status. But this right has to be read with Article 2 of the UN Charter which lists the principle of non-intervention as one of the seven core principles of the UN. Moreover, since the drafting of the UN Charter, the principle of self-determination has been understood in the context of decolonisation rather than the annexation of new territories on the pretext of self-determination.

Rules on occupation

Under international law, Russia’s control over the four Ukrainian regions, before the so-called referendums, is known as ‘belligerent occupation’. Rules on belligerent occupation are explained under the Hague Convention of 1899 — the first treaty that laid down the laws of war. Article 43 of the Convention states that if “the authority of the legitimate power over territory” has “passed into the hands of the occupant, the latter shall take all steps in his power to re-establish and ensure public order and safety”. Furthermore, while doing so, the occupant shall “respect, unless absolutely prevented”, the domestic laws of the country whose territory it has occupied.

Russia’s unilateral action of merging the four Ukrainian territories with it is a flagrant violation of Article 43 of the Hague Convention. The Article clearly states that Russia, being the occupier, only has ‘authority’ and not ‘sovereignty’ over these regions. Further, any change in this status, i.e. from ‘authority’ to ‘sovereignty’ can only happen with Ukraine’s consent. Moreover, Russia should have retained the existing Ukrainian laws of these regions. But Russia has made these regions part of its own territory, which means, Russian laws would apply there now.

What is ironic is that the Hague Conferences were led by the Russian Tsar Nicholas II. For all the criticism of the West, Mr. Putin is not even following a law whose creation was led by his own countrymen.

Nuclear bluff

In a recent speech, the Russian President, in an extremely irresponsible and provocative fashion, hinted at using nuclear weapons in the ongoing war. Consequently, the threat of a catastrophic nuclear war lingers in the background. Neither Russia nor Ukraine has signed the Treaty on the Prohibition of Nuclear Weapons. But here again, the UN Charter is helpful to understand the legality of these nuclear threats. The Charter provides the right of individual and collective self-defence, which means that if Russia launches a nuclear attack, not only Ukraine but also its allies can launch a counter-attack on Russia in collective self-defence. Furthermore, the Charter empowers the Security Council to take action even in the case of threat of force. Mr. Putin’s statement is a threat of nuclear war, i.e., the threat of use of force in the Charter terms. As such, nothing stops the UN Security Council from initiating action under Chapter VII of the Charter against Russia. Of course, it is not going to materialise, primarily because of Russia’s veto power as a UN Security Council member.

Finally, ultra-realist foreign policy honchos will point to the irrelevance of international law as it has failed in restraining Russia. However, an autocrat’s defiance of international law does not diminish its importance. After all, there are scores of examples in contemporary times of totalitarian regimes violating their own country’s laws with impunity. But that does not make domestic law irrelevant. On the contrary, it underscores the need for everyone to boisterously emphasise its importance. Likewise, the need to articulate international law norms is highest in the face of its blatant violation. We should not end up on the wrong side of history.

5. Editorial-2: The ‘October surprise’ and the November election

With barely weeks to go for the November showdown, Republicans and Democrats are bracing for an event that not only sets the political landscape in the United States for the next two years but also the general framework for the showdown in 2024, with or without Donald Trump. Democrats are especially concerned and should be for more than one reason. Holding their own ranks is a major task and beating back the persistent and worn-out rhetoric of many in the Grand Old Party (GOP) of a fraudulent U.S. presidential election in 2020 seems to be a bigger challenge.

Recently, Democrats were bracing themselves for a disastrous rout on November 8. The party was expected to be beaten badly in the House of Representatives and the chances of the GOP wresting control of the Senate also seemed to be a distinct possibility. The poor ratings of the Democrats aside, what hurt was the standing of U.S. President Joseph Biden who had an approval rating between the low to mid 30s.

Findings of NPR poll

But a latest NPR poll shows Mr. Biden to be rebounding to an approval rate of 44%. Still, not many political pundits are sure if this will reflect on the fortunes of the Democratic Party. At one time this June, the country was just outraged that the U.S. Supreme Court had overturned the historic Roe vs Wade, in what led to an emotional and spirited debate on abortion and the right of a woman over her body. Three months ago, and for a brief period of time, ‘abortion’ ranked as one of the top issues in the mid-term elections. But to the dismay of many liberals, that subject is slowly falling off the radar to perhaps fifth or sixth position in the scheme of things only to be replaced by what conservatives have used to go after the Biden administration — inflation and crime. The NPR/Marist poll also had some warning signals to the Democrats, the first of which being that 70% of respondents believed that the country is headed in the wrong direction and that inflation is the number one issue that voters say is on the top of their minds when casting their ballots. On the enthusiasm front, there is again trouble even as both parties are charged up for the election. The whites and college-educated segment who have leaned to the Democratic side in the past decade continue to be the most engaged, but the latest survey has shown that young and African-American voters are least likely to vote — this is trouble.

Past political events

One of the things that has been of interest, at least since the 1980s, was something known as “October Surprise”, or an event/ events that happen suddenly, re-shaping or attempting to re-work the political framework. For instance, in the election between Jimmy Carter and Ronald Reagan (Republican) in 1980, there was an eerie feeling in the conservative camp that the 52 American hostages held in Tehran since the overthrow of the Shah in 1979 would be released ahead of the November election so as to give (incumbent) President Carter an electoral advantage.

In fact, an unproved allegation has been that the Reagan team worked with the Iranians and convinced them to have the hostages freed only after the election was over. The Americans were finally let go on the day of Reagan’s inauguration in January 1981. The closest to an October Surprise came in 2016 when days before the election, the Director of the Federal Bureau of Investigation, James Comey, informed members of Congress that he was re-opening the matter pertaining to Hillary Clinton’s handling of confidential e-mails. To this day, many Democrats believe that it cost Ms. Clinton the Presidential election. The election of 2022 had its share of surprises as well starting with Republican hopeful for a Senate seat in Georgia, Herschel Walker, the football legend, alleged to have paid for his girlfriend’s abortion even as he was politically opposed to abortion. The flatout denials from the Walker camp and the candidate aside, revelations that he is the father of one of the children by the same woman do not seem to have worried the GOP. Neither has the issue gathered enough traction in spite of all the heat between Democrats and Republicans for control of the Senate.

The Saudi factor

The real October Surprise could come in November and in the form of Saudi Arabia which has agreed, as a part of the Organization of the Petroleum Exporting Countries, to curtail oil production up to two million barrels of oil a day or more that would not only result in increased crude prices but also assist Russia. The worst part is that at a time when gas prices have been seen stabilising in pumps in the U.S., the Biden White House and Democrats are again seeing gasoline as one of the top issues in the November election. This is not a comforting thought. For now, the Biden administration is said to be looking at various options including perhaps lifting some sanctions against Iran and Venezuela so as to incentivise their higher production. But Saudi Arabia has given the perfect opportunity for law makers, including from the Democratic Party, to not only question the wisdom of Mr. Biden having visited the kingdom in July but also focus on a complete reassessment of U.S.-Riyadh relations including the stationing of American troops and the selling of sophisticated weaponry to that country.

6. Editorial-3: Building resilient mineral supply chains

In his Independence Day address, Prime Minister Narendra Modi exhorted the country to pursue aatmanirbharta in energy by focusing on clean energy technologies. Concerns over the pricing and availability of oil and gas in the wake of the Ukraine crisis continue to fuel global policy debates on energy security. However, the fragility of clean energy supply chains obscures pathways for countries to reduce dependence on fossil fuels.

Imported inflationary pressures through exposure to volatile oil and gas markets also pose risks to macroeconomic growth and stability, particularly for India, import-dependent for around 85% of its oil and half of its gas needs. Therefore, securing access to key minerals such as lithium, cobalt, nickel and rare earth metals is critical for building resilient and indigenous supply chains for clean energy technologies.

A challenging task

This is challenging on several counts. First, reserves are often concentrated in regions that are geopolitically sensitive or fare poorly from an ease of doing business perspective. Second, a portion of existing production is controlled by geostrategic competitors. For example, China wields considerable influence in cobalt mining in the Democratic Republic of Congo through direct equity investments and its Belt and Road Initiative. Third, future mine production is often tied up in offtake agreements, in advance, by buyers from other countries to cater to upcoming demand.

As a first step towards the sourcing of strategic minerals, the Indian government established Khanij Bidesh India Limited (KABIL) in 2019 with the mandate to secure mineral supply for the domestic market. Based on a CEEW study, here are suggestions that policymakers could consider to further this objective.

First, figure out the mineral requirements of the domestic industry. This could best be accomplished by a task force which includes the ministries of power, new and renewable energy, heavy industry, and science and technology. Creating five-year road maps with clear targets for deployment and indigenous manufacturing across clean energy applications would provide visibility to domestic investors. Further, assess the technology mix that would support this deployment. On this basis, determine the quantities of minerals necessary to support indigenous manufacturing.

Second, coordinate with the domestic industry to determine where strategic interventions by the government would be necessary for the purpose. KABIL could collaborate with industry to bolster its market intelligence capabilities for tracking global supply-side developments. Developing a granular picture of available and committed production capacities and economy-wide and sector-specific policy developments is the first step to develop an informed perspective on mineral supply. If there is adequate visibility on sourcing opportunities in conducive geographies, the private sector should be encouraged to secure minerals for its own requirements.

Third, if conducive investments opportunities don’t exist, KABIL should pre-emptively sign offtake agreements with global mineral suppliers to secure future production. It could aggregate a reliable supply of minerals for domestic requirements and sign back-to-back sales agreements with the domestic industry. Such large-scale centralised national procurement could be done at preferential terms.

Fourth, the government should jointly invest in mining assets with geostrategic partners. KABIL should make equity investments in mining jurisdictions that private sector investors may deem too risky. It should leverage government-to-government partnerships to mitigate investment risks. This could be done through joint investments with sovereign entities from geostrategic partners or private sector entities with expertise in specific geographies. The External Affairs Ministry could initiate conversations with partner countries. Establishing resilient clean energy supply chains is a priority for the Quad, for instance.

Fifth, support technologies that utilise domestically available materials. The deployment of technologies such as sodium-ion batteries could reduce requirements for sourcing minerals from beyond India’s borders. While the current performance-linked incentive scheme on batteries is technologically agnostic, India could consider creating a tranche of capital to incentivise investments in technologies that rely on local raw materials. It could also propose co-development of such technologies with geostrategic partners.

Lastly, develop policies on urban mining aimed at recycling mineral inputs from deployments that have completed their useful life. These could help further reduce dependence on international sourcing. Besides Ukraine, other potential geopolitical flashpoints also exist against a backdrop of dwindling multilateral cooperation. India must act immediately and decisively to mitigate these risks to its energy security.

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on pinterest


Leave a Reply

Your email address will not be published. Required fields are marked *