• The Strait of Hormuz is a strategically significant and narrow maritime passage situated between Iran and Oman, serving as a link between the Persian Gulf, the Gulf of Oman, and the Arabian Sea. The U.S. Energy Information Administration (EIA) has labeled it as the world’s most vital oil transit chokepoint, through which nearly 20% of global liquid petroleum fuels and a substantial portion of LNG trade pass. In May, more than 45% of India’s crude oil imports were estimated to have transited through this strait. Given that India is the third-largest consumer of crude oil globally and imports over 85% of its oil needs, the strait plays a crucial role in its energy security.

• Data from the commodity analytics firm Kpler indicates that, as of June, India has been importing over 2.2 million barrels per day (bpd) of crude oil from Russia, which constitutes more than 41% of its total oil imports.

• While oil imports from the U.S. have shown a steady rise, supplies from West Asian nations such as Iraq, Saudi Arabia, the UAE, and Kuwait have remained relatively consistent. Many of these shipments were likely planned prior to the recent escalation in tensions between Israel and Iran, and therefore, may not reflect the impact of the current geopolitical developments.

• Over the past two to three years, India has notably adjusted its oil import strategy. Russia has emerged as India’s top crude supplier, overtaking traditional exporters from West Asia. Importantly, Russian oil bypasses the Strait of Hormuz, as it is mainly transported via alternative sea routes like the Suez Canal and Red Sea, and sometimes through the Cape of Good Hope or Pacific Ocean routes.

6.1 The burden for Poor countries

• The WTO rules include many Non-trade subjects as well. The subjects like environment, labor standards, fossil fuel subsidies, plastic pollution, and transparency in government procurement have been brought into the fold of the WTO.
• This is expected to raise costs for the poor and developing countries and impact the competitiveness of their goods.
• For instance, a poor country exporting cotton shirts must first meet high environmental standards at home. This will only raise costs and cut exports from poor countries.

6.2 Trade wars

• The US administration imposed steep tariffs in January 2018 on China alleging IP violations.
• In December 2019 the US also blocked the appointment of new nominees to WTO’s appellate body. This has paralyzed the WTO as a judge and enforcer of global trade rules.

6.3 Lack of consensus

• The developed nations’ game plan is to put the old obligations on the back burner and push the WTO to form rules on new areas like e-commerce.
• It is an area where the US firms have a clear edge.
• Most WTO member countries want them to first deliver on the agreed issues like reduction in agriculture subsidies.

• Special Economic Zones (SEZs) are specifically demarcated geographical areas within a country that are governed by unique economic regulations and business laws, which are different from those applicable in the rest of the country.
• These zones are established with the primary aim of attracting foreign and domestic investment, boosting exports, generating employment, and encouraging industrial growth by providing a more liberal economic environment.
• The concept of SEZs gained momentum globally after their success in countries like China, where regions such as Shenzhen transformed into massive industrial and commercial hubs.
• India adopted the SEZ model in the early 2000s with the enactment of the Special Economic Zones Act, 2005, which provided a comprehensive legal framework for their establishment, operation, and regulation.
• Within an SEZ, companies often enjoy a host of incentives and facilities. These may include tax exemptions on income, customs and excise duties, and relaxed labor and environmental norms. The idea is to reduce bureaucratic hurdles and create an investor-friendly climate that encourages industries, especially those focused on export-oriented production, to flourish.
• Moreover, SEZs are treated as foreign territories for the purpose of trade operations, duties, and tariffs. This means that goods and services entering an SEZ from the rest of the country are treated as exports, and those leaving an SEZ to the domestic tariff area are considered imports. This unique status allows businesses in SEZs to operate with greater flexibility and global competitiveness.
• However, SEZs in India have not been without criticism. While they have succeeded in some areas in boosting exports and creating jobs, concerns have been raised over land acquisition practices, uneven regional development, and the environmental impact of industrialization. Additionally, the promise of large-scale employment and export-led growth has not materialized uniformly across all SEZs.
• In recent years, the Indian government has been looking to revamp and repurpose SEZs to align them with new economic goals, including the Make in India initiative and the promotion of green and digital manufacturing.
• As India aims to become a global manufacturing and logistics hub, SEZs are likely to play a key role, provided regulatory and infrastructural bottlenecks are addressed effectively

• Semiconductors are fundamental to our increasingly digital world, serving as the core components behind technologies like artificial intelligence and machine learning—part of a broader trend of growing automation and electronic integration.
• These minute chips enable the processing of large volumes of data, powering devices such as smartphones, laptops, tablets, smart TVs, voice assistants, vehicles, and virtually all modern electronic equipment.
• In 2021, data from the Semiconductor Industry Association indicated that China produced nearly 35% of the global semiconductor output.
• The disruptions caused by the COVID-19 pandemic exposed the vulnerabilities of heavily centralized supply chains, prompting countries, including India, to recognize the strategic risk of relying on a single nation for critical components.
• As a result, many nations began efforts to strengthen and expand their own domestic semiconductor manufacturing capabilities

The primary aim of the policy is to:

• Attract global semiconductor manufacturers to set up fabrication (fab) units in India.

• Promote design, fabrication, packaging, and testing of semiconductors.

• Create a skilled workforce for the semiconductor ecosystem.

• Enable India’s transition from being a consumer to a producer of semiconductors.

• Strengthen India’s position in global supply chains and reduce strategic vulnerabilities.

 

6. Way forward

 

As these changes have only been implemented recently, it is too early to determine their long-term consequences. Nevertheless, the initial response has been promising, with two new SEZs already receiving approval, amounting to a combined investment of ₹13,100 crore. Micron Semiconductor Technology India plans to set up a semiconductor manufacturing SEZ in Sanand, Gujarat, with an investment of around ₹13,000 crore. Additionally, the Hubballi Durable Goods Cluster, affiliated with the Aequs Group, is set to establish an SEZ for producing electronic components in Dharwad, Karnataka, at an estimated cost of ₹100 crore

 

For Prelims: Semicon India Programme, India Semiconductor Mission, Micron investment, India-USA semiconductor cooperation   For Mains: Self-reliance in technology, strategic industries, manufacturing and innovation, supply chain resilience

 

 

Source: The Hindu

 

 

RARE EARTH ELEMENTS

 

 

1.Context

 

Amid Chinese restrictions on export of rare earth minerals, some smaller Indian companies are working on indigenous solutions to reduce dependence on imports. Two Bengaluru-based companies — Simple Energy and Chara Technologies — claim to have developed electric motors that eliminate the need for heavy rare earth elements — critical components in modern EVs.

 

2.About rare earth metals

 

Rare earth elements or rare earth metals are a set of 17 chemical elements in the periodic table  the 15 lanthanides, plus scandium and yttrium, which tend to occur in the same ore deposits as the lanthanides, and have similar chemical properties

 

The 17 rare earths are cerium (Ce), dysprosium (Dy), erbium (Er), europium (Eu), gadolinium (Gd), holmium (Ho), lanthanum (La), lutetium (Lu), neodymium (Nd), praseodymium (Pr), promethium (Pm), samarium (Sm), scandium (Sc), terbium (Tb), thulium (Tm), ytterbium (Yb), and yttrium (Y)

 

Despite their classification, most of these elements are not really “rare”. One of the rare earths, promethium, is radioactive

Source:Thermo Fisher Scientific

 

 

3.Applications of rare earths

• These elements are important in technologies of consumer electronics, computers and networks, communications, clean energy, advanced transportation, healthcare, environmental mitigation, and national defence, among others
• Scandium is used in televisions and fluorescent lamps, and yttrium is used in drugs to treat rheumatoid arthritis and cancer
•  Rare earth elements are used in space shuttle components, jet engine turbines, and drones
• Cerium, the most abundant rare earth element, is essential to NASA’s Space Shuttle Programme
• In recent years, rare earths have become even more important because there has been an increase in demand for green energy
• Elements like neodymium and dysprosium, which are used in wind turbine motors, are sought-after more than ever as wind mills across the world continue to grow
• Moreover, the push for switching from internal combustion cars to electric vehicles has also led to a rise in demand for rare earth magnets made from neodymium, boron, and iron and batteries

 

 4. China's export restrictions and impact on India

 

• China has imposed restrictions on the export of seven rare earth elements (REEs) — dysprosium, gadolinium, lutetium, samarium, scandium, terbium, and yttrium — which are part of the 17 REEs.
• The country dominates the global refining of heavy REEs, giving it substantial control over critical supply chains, ranging from consumer electronics to defense. Although these measures do not constitute a complete export ban, they may cause temporary supply disruptions, as exporters navigate the permit process.
• India may not face an immediate disruption due to these restrictions. Despite government efforts to enhance domestic manufacturing of semiconductors and defense systems, the more sophisticated phases of production largely take place abroad, particularly in China and Japan. Japan, in anticipation of such issues, has already built stockpiles to buffer against REE-related supply shocks.
• Recognizing the strategic importance of REEs, India is aware that it holds around 6% of global deposits. However, the country’s capacity for mining and refining is minimal, largely due to the environmental challenges associated with such operations.
• India does extract some light REEs through its state-run firm, Indian Rare Earths Ltd, including monazite from coastal sands in Kerala. Nonetheless, imports still play a role.
• According to a recent statement by the Ministry of Mines in the Lok Sabha, India imported approximately 2,270 tonnes of REEs in 2023–24. Consequently, the national approach involves a mix of increasing domestic output and maintaining import channels

 

5. Way Forward

 

To support the strategic use of essential resources such as rare earth elements, India has launched the National Critical Mineral Mission (NCMM). This initiative aims to strengthen the country’s supply chain for critical minerals by boosting domestic production and establishing alternative international supply partnerships. According to a presentation by the Ministry of Mines in January, global events like China’s export restrictions, the Russia–Ukraine conflict, and other geopolitical factors have exposed vulnerabilities in the global critical mineral supply, underscoring the urgency of diversifying sources.

As part of the NCMM, the Indian government plans to oversee or support around 1,200 mineral exploration projects. It also intends to offer exploration licenses to encourage private sector participation and conduct auctions for additional critical mineral blocks

 

 

For Prelims: Applications of rare earths, rare earth elements For Mains: 1.Europe’s largest known deposit of rare earth elements found in Sweden: Could the discovery change geopolitics?

 

Previous Year Questions   1.Recently, there has been a concern over the short supply of a group of elements called ‘rare earth metals’. Why? (2012) China, which is the largest producer of these elements, has imposed some restrictions on their export. Other than China, Australia, Canada and Chile, these elements are not found in any country. Rare earth metals are essential for the manufacture of various kinds of electronic items and there is a growing demand for these elements. Which of the statements given above is/are correct? (a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3 Answer (c)

 

Source:indianexpress