Cabinet approves ₹2,814 crore capex scheme for lithium and nickel processing plants
In one line: The Centre will pay up to 30% of the capital cost of two lithium and two nickel processing plants, so that India refines the battery minerals it now imports.
Published 4 November 2026. Written by Pratidin from the reports linked at the end; every fact checked by a separate review before publishing. How we work
On 4 November 2026 the Union Cabinet, chaired by Prime Minister Narendra Modi, approved a Capital Expenditure Support Scheme for Promoting Critical Mineral Processing with an outlay of ₹2,814 crore. Union Minister Ashwini Vaishnaw briefed the media on the decision. The scheme runs for five years, from 2026-27 to 2030-31. It will give a capital subsidy of 30% of eligible investment to set up domestic plants that convert lithium and nickel ores or intermediates into high-purity compounds. Cobalt is to be recovered as a by-product of nickel production.
Only four plants will be supported: two lithium processing plants, each with a minimum capacity of 30,000 tonnes, and two nickel processing plants, each with a minimum capacity of 50,000 tonnes. Support is capped at ₹500 crore per lithium beneficiary and ₹900 crore per nickel beneficiary. Selection has two stages: a technical eligibility check, then financial bidding in which the two applicants per mineral seeking the lowest capital subsidy are chosen. Incentives will be paid in three tranches linked to targets. The output is meant for electric mobility, battery energy storage systems, electronics, defence and specialty steel.
The government says India's processing capacity for these minerals is at an early stage and that the country relies heavily on imports of refined intermediates and high-purity materials, while processing worldwide "remains geographically concentrated in a few global locations". It lists high capital needs, limited access to technology and constrained access to raw materials as the main hurdles. The scheme adds a processing layer to the National Critical Mineral Mission approved in January 2025 and the ₹1,500 crore recycling incentive scheme approved in September 2025. Its success will depend on whether the plants can secure feedstock, given the constrained access to raw materials the government itself acknowledges.
Prelims facts
- The Cabinet approved a ₹2,814 crore capex support scheme for critical mineral processing on 4 November 2026, for 2026-27 to 2030-31.
- It gives a 30% capital subsidy to two lithium plants (at least 30,000 tonnes each) and two nickel plants (at least 50,000 tonnes each).
- Subsidy caps are ₹500 crore per lithium beneficiary and ₹900 crore per nickel beneficiary; cobalt will be recovered from nickel.
- Winners are chosen by least-cost bidding after a technical test, and paid in three target-linked tranches.
- It complements the National Critical Mineral Mission (January 2025) and the ₹1,500 crore recycling scheme (September 2025).
Quick recall
- Outlay and period of the 2026 critical mineral processing capex scheme?
- ₹2,814 crore over five years, 2026-27 to 2030-31.
- Rate of capital subsidy under the scheme?
- 30% of eligible investment.
- Minimum capacity of each lithium plant supported?
- 30,000 tonnes.
- Minimum capacity of each nickel plant supported?
- 50,000 tonnes.
- Subsidy cap per lithium and per nickel beneficiary?
- ₹500 crore (lithium) and ₹900 crore (nickel).
- Which mineral is to be recovered as a by-product of nickel processing?
- Cobalt.
- When was the National Critical Mineral Mission approved, and its government outlay?
- 29 January 2025; ₹16,300 crore of government spending plus ₹18,000 crore expected from PSUs and others.
- Recycling capacity target of the 2025 critical mineral recycling scheme?
- At least 270 kilotonnes a year, yielding about 40 kilotonnes of critical minerals.
Prelims practice question
With reference to the Capital Expenditure Support Scheme for Promoting Critical Mineral Processing approved in November 2026, consider the following statements:
1. It provides a capital subsidy of 30% of eligible investment.
2. It will support two lithium and two nickel processing plants.
3. Beneficiaries are chosen on the basis of the highest committed production capacity.
Which of the statements given above are correct?
- 1 and 2 only
- 2 and 3 only
- 1 and 3 only
- 1, 2 and 3
Show answer
Answer: (a) 1 and 2 only. Statements 1 and 2 are correct: the subsidy is 30% of eligible investment and the scheme covers two lithium and two nickel plants. Statement 3 is wrong: after a technical test, the two applicants per mineral seeking the lowest capital subsidy are selected.
Use this in UPSC Mains: previous-year questions
Recurring theme: Critical minerals, supply chain resilience and India's industrial policy for the energy transition
- How to use this
Show that India is building its own processing capacity so that partners can treat it as an alternative to concentrated supply chains.
- The Cabinet noted in November 2026 that critical mineral processing remains geographically concentrated in a few global locations.
- A ₹2,814 crore scheme gives a 30% capital subsidy to two lithium and two nickel processing plants from 2026-27 to 2030-31.
- India relies heavily on imports of refined intermediates and high-purity materials, which the four plants are meant to replace.
- How to use this
Use the scheme as an example of securing the mineral inputs of clean technology, such as batteries for electric vehicles and grid storage.
- Lithium plants of at least 30,000 tonnes and nickel plants of at least 50,000 tonnes are to supply electric mobility and battery storage.
- Cobalt will be recovered as a by-product of nickel processing.
- A ₹1,500 crore recycling scheme targets 270 kilotonnes of recycling capacity to feed such plants.
Tests the critical minerals policy frame (Minerals Security Partnership, 2023 MMDR amendment) to which this processing scheme is the latest addition.
Mains practice question
Domestic processing, not mining alone, will decide India's security of critical mineral supply. Discuss in the light of the capex support scheme for lithium and nickel processing approved in 2026. (250 words)
Model answer
On 4 November 2026 the Cabinet approved a ₹2,814 crore scheme giving a 30% capital subsidy to two lithium and two nickel processing plants, recognising that refining is India's weakest link in the critical minerals chain.
Why processing is the bottleneck
- Concentration: the Cabinet notes processing "remains geographically concentrated in a few global locations".
- Import dependence: India relies heavily on imported refined intermediates and high-purity materials.
- Value addition: ore or mines abroad do not help if refining happens elsewhere.
- Uses: electric mobility, battery storage, electronics, defence and specialty steel need these compounds.
What the scheme does
- 30% capex subsidy over 2026-27 to 2030-31.
- Lithium plants of at least 30,000 tonnes, nickel plants of at least 50,000 tonnes; cobalt as a by-product.
- Caps of ₹500 crore (lithium) and ₹900 crore (nickel) per beneficiary.
- Least-cost bidding after technical screening; three target-linked tranches.
Limits
- Four plants are a start, not a full value chain.
- Access to raw materials is constrained, so feedstock may still be imported.
- Refining is energy, water and waste intensive.
Way forward
- Link plants to overseas assets under the National Critical Mineral Mission, such as KABIL's lithium blocks in Argentina.
- Feed them recycled material through the ₹1,500 crore recycling scheme (270 kilotonnes capacity target).
- Build processing parks, a stockpile and research capacity, as the Mission envisages.
Mining secures ore, but only domestic refining, backed by feedstock and recycling, can turn it into real supply security.
The basics
Why this matters
India can dig up ore, or buy it abroad, but a battery maker needs high-purity chemicals such as lithium carbonate or nickel sulphate. Turning ore into these chemicals is called processing or refining, and India's capacity for it is at an early stage. On 4 November 2026 the Union Cabinet approved a ₹2,814 crore scheme to pay part of the cost of building the first large plants. Prelims can ask about the scheme's design; Mains asks about supply chains, import dependence and energy transition.
What processing means
Mining gives ore. Beneficiation concentrates it. Processing turns the concentrate or an imported intermediate into a high-purity compound that a factory can use. The Cabinet note says processing of critical minerals "remains geographically concentrated in a few global locations", so a country without refineries depends on others even if it owns mines.
- 1Exploration and miningFinding and extracting ore, the focus of auctions and the National Critical Mineral Mission
- 2BeneficiationConcentrating the useful mineral in the ore
- 3Processing or refiningConverting ores or intermediates into high-purity lithium and nickel compounds: the gap this scheme targets
- 4ManufacturingCells and batteries for electric vehicles, energy storage, electronics and defence
- 5RecyclingRecovering minerals from e-waste and battery scrap
How the scheme works
The scheme runs for five years, 2026-27 to 2030-31. It offers a capital subsidy of 30% of eligible investment. Only four plants will be supported: two for lithium, each of at least 30,000 tonnes a year, and two for nickel, each of at least 50,000 tonnes. Cobalt will be recovered as a by-product of nickel. Applicants first pass a technical test; the technically eligible then bid, and the two asking for the least subsidy for each mineral win. Money is paid in three tranches linked to targets.
- Two plants
- Minimum 30,000 tonnes each
- Subsidy cap ₹500 crore per beneficiary
- Two plants
- Minimum 50,000 tonnes each
- Subsidy cap ₹900 crore per beneficiary
- Cobalt recovered as a by-product
Where it fits
The scheme is one piece of a larger policy. The National Critical Mineral Mission (2025) covers the whole chain from exploration to recycling, and a separate Critical mineral recycling scheme (2025) supports recovery from scrap. This scheme fills the middle: Critical mineral processing. Its design, a Capital subsidy and least-cost bidding, is meant to keep the cost to the public low.
- 2023Parliament amends the MMDR Act so the Centre can auction certain critical minerals
- 29 January 2025Cabinet approves the National Critical Mineral Mission
- 3 September 2025Cabinet approves a ₹1,500 crore recycling incentive scheme
- 4 November 2026Cabinet approves the ₹2,814 crore processing capex scheme
Go deeper
Why it matters for UPSC
Critical minerals sit at the meeting point of economy (GS3), energy transition (GS3), and foreign policy and supply chains (GS2). Prelims has already asked about the Minerals Security Partnership and the 2023 MMDR amendment. This scheme adds a new layer: processing.
The core idea
India's weak link is Critical mineral processing: turning ore or imported intermediates into high-purity chemicals. The Cabinet says processing is concentrated in a few countries, which exposes buyers to geopolitical disruption, price swings and export curbs. The scheme uses a Capital subsidy and least-cost bidding model to back only four plants. It complements the National Critical Mineral Mission, which covers exploration to recycling, and the Critical mineral recycling scheme, which supports recovery from scrap.
Numbers and dates to remember
- Outlay: ₹2,814 crore over 2026-27 to 2030-31 (five years), approved on 4 November 2026.
- Subsidy: 30% of eligible investment, paid in three tranches.
- Lithium: two plants, at least 30,000 tonnes each, cap ₹500 crore per beneficiary.
- Nickel: two plants, at least 50,000 tonnes each, cap ₹900 crore per beneficiary; cobalt as by-product.
- National Critical Mineral Mission: approved 29 January 2025; ₹16,300 crore government spending plus ₹18,000 crore expected from PSUs and others.
Where to go next
- Critical mineral processing: why refining, not mining, is the real bottleneck.
- National Critical Mineral Mission: the umbrella mission this scheme sits under.
- Critical mineral recycling scheme: the 2025 scheme for recovering minerals from scrap.
- Capital subsidy and least-cost bidding: how the scheme picks winners and limits public cost.
Go deeper: is a capex subsidy the right tool?
The case for. Processing plants need large up-front capital, access to technology and assured raw material, the three hurdles the Cabinet lists. A 30% subsidy lowers the first hurdle. Because the four winners are chosen by asking who needs the least support, the government pays only what the market says is needed, and the per-beneficiary caps (₹500 crore for lithium, ₹900 crore for nickel) bound the risk. Tranche-wise release ties money to progress. Recovering cobalt from nickel adds a third mineral to the output.
The case for caution. Four plants are a start, not a supply chain. The government itself lists constrained access to raw materials as a hurdle, so the plants may have to run on imported ores or intermediates, which shifts dependence from refined chemicals to raw inputs rather than ending it. That is why the scheme must work alongside overseas asset buying under the National Critical Mineral Mission, such as KABIL's lithium blocks in Catamarca, Argentina, and with the Critical mineral recycling scheme, which turns battery scrap into feedstock. Chemical refining is also water and energy intensive and produces waste, so environmental clearances and pollution control matter.
Comparisons. Production-linked incentives pay on output. This scheme pays on capital spent instead, because a refinery earns nothing until it is built. See Capital subsidy and least-cost bidding for how the two designs differ, and Critical mineral processing for why value addition at home is the stated goal: import substitution, economic security and lower emissions.
Critical mineral processing
Why refining, not mining, is India's real bottleneck.
In one line: Processing converts ores or intermediates into the high-purity compounds that factories actually use.
From ore to chemical
A lithium-ion battery does not use rock. It uses chemicals such as lithium compounds and nickel compounds of very high purity. The step that makes them is processing or refining. It needs specialised chemistry, a lot of capital and steady feedstock.
Why it is in the news
The Cabinet note of 4 November 2026 says India's processing infrastructure for lithium, nickel and cobalt is at an early stage, and that India relies heavily on imported refined intermediates and high-purity materials. It also says processing "remains geographically concentrated in a few global locations". Owning a mine abroad or at home does not help much if the ore must still be shipped to another country to be refined.
Where to go next
National Critical Mineral Mission
The umbrella mission that covers the whole mineral chain.
In one line: The National Critical Mineral Mission, approved on 29 January 2025, is India's umbrella plan for securing critical minerals from exploration to recycling.
What it covers
The Finance Minister announced the mission in the Union Budget for 2024-25 on 23 July 2024. It has government spending of ₹16,300 crore and expected investment of ₹18,000 crore by PSUs and others. It covers exploration (including offshore), mining, beneficiation, processing and recovery from end-of-life products. It provides for mineral processing parks, a national stockpile, faster approvals, incentives for exploration, and support for Indian firms buying mineral assets abroad.
Earlier steps
The Mines and Minerals (Development and Regulation) Act was amended in 2023, and customs duties on most critical minerals were removed in the 2024-25 Budget. KABIL, a Ministry of Mines joint venture, acquired about 15,703 hectares in Catamarca, Argentina, for lithium.
Where to go next
National Critical Mineral Mission: every story that connects to it (3)
Critical mineral recycling scheme
The 2025 scheme that turns scrap into feedstock.
In one line: A ₹1,500 crore incentive scheme, approved on 3 September 2025, supports recovering critical minerals from e-waste and battery scrap.
The design
The scheme runs for six years, 2025-26 to 2030-31. It aims to create at least 270 kilotonnes a year of recycling capacity, yielding about 40 kilotonnes of critical minerals a year. Eligible feedstock is e-waste, lithium-ion battery scrap and other scrap.
Why it matters now
With access to raw materials constrained, recycled material is one way to feed new refineries. Recycling and processing together form the "circular" end of the chain under the National Critical Mineral Mission.
Where to go next
Capital subsidy and least-cost bidding
How the scheme picks winners and caps public cost.
In one line: A capital subsidy pays part of the cost of building a plant; least-cost bidding gives it to whoever asks for the least.
Capex support versus output incentives
A production-linked incentive pays a firm a share of the value it produces. A capital expenditure (capex) subsidy pays a share of what it spends to build. For a refinery, which earns nothing for years, help with construction cost is the bigger need. This scheme pays 30% of eligible investment.
How winners are picked
Selection has two stages. First, applicants must pass a technical eligibility test. Then technically eligible applicants bid, and for each mineral the two seeking the lowest capital subsidy are chosen. Money is released in three tranches linked to targets. Caps of ₹500 crore per lithium beneficiary and ₹900 crore per nickel beneficiary limit exposure: for four plants the caps add up to ₹2,800 crore.
Where to go next
Take the 4 November 2026 quiz: 30 Prelims-style questions with answers