Vedanta, Hindustan Zinc, GMDC: Metal stocks in focus as Cabinet approves ₹2,814 crore critical mineral processing outlay

Metal, mining and mineral processing stocks like Vedanta, Hindustan Zinc, and Gujarat Mineral Development Corp. (GMDC), among others, are set to remain in focus of investors on Thursday, November 5, after the Union Cabinet approved a ₹2,814 crore outlay for critical mineral processing in the country.

On Wednesday evening, the Prime Minister Narendra Modi-led Union Cabinet approved a ‘Capex Support Scheme,’ in an effort to promote critical mineral processing in the country with the help of a ₹2,814 crore financial outlay over a period of five years.

As part of the scheme, the central government will grant a 30% capital subsidy on eligible investment for setting up four critical mineral processing plants in the country, according to the official announcement.

Two out of the four plants will be for lithium processing with a minimum capacity of 30 kilotonnes (kt) each, and the remaining two will be for nickel processing with a minimum capacity of 50 kilotonnes (kt) each.

“The maximum capital support will be capped at ₹500 crore per lithium beneficiary and ₹900 crore per nickel beneficiary, respectively,” the Union Cabinet said.

Companies like Vedanta, Hindustan Zinc and GMDC have a direct impact from this scheme, as each one of them has developed and integrated critical mineral mining and processing capabilities.

Other companies like Adani Enterprises, Coal India, National Aluminium Co., NMDC, Gravita India, etc., are currently focusing on expanding or diversifying their portfolio to include critical minerals and will also be in the focus of investors on November 5 due to the future potential of this industry.

How will govt select the beneficiaries?

The Union Cabinet disclosed that the companies/beneficiaries of the scheme will be selected through a two-stage process in which, first, the applications will be assessed for technical qualification and only technically qualified applicants shall be eligible to participate in the second stage of financial bidding.

“For each mineral, two beneficiaries shall be selected based on the least-cost criterion, i.e., the lowest CAPEX support sought by the bidders under the Scheme. The incentives will be disbursed in three tranches linked to the achievement of specified milestones,” said the Cabinet.

Why did Centre launch this scheme?

With India currently dependent on imports of refined and high-purity critical minerals, the domestic processing infrastructure and capacity for critical minerals, including Lithium, Nickel, Cobalt, etc., remain limited.

Through this scheme, the central government aims to develop domestic processing capabilities in India to support value addition, reduce India's import dependence, and develop a value chain for critical minerals.

The downstream impact of this scheme will be on key sectors and companies using these critical minerals, such as manufacturing electric mobility vehicles, the BESS industry, electronics, defence, and even speciality steel manufacturing.

“This will support critical sectors such as electric mobility, Battery Energy Storage System (BESS), electronics, defence, speciality steel, etc.,” as per the official statement from the Union Cabinet.