Mint Explainer: The need to look beyond the big lithium find

Has India hit the lithium jackpot?

It’s too early to say for sure. The Geological Survey of India had reported the possibility of lithium reserves in Jammu and Kashmir in 1999. After more than two decades, it has found “inferred resources” of lithium – possibly around 5.9 million tonnes – in the Reasi district of Jammu and Kashmir in the next round of exploration. But these are still early estimates, and much more groundwork needs to be done to establish the quantum of lithium that can be mined.

Even in the best-case scenario, global experience shows it may take several years – around a decade or more – to dig out the buried lithium and put it in inside batteries that can power your cars and two-wheelers. So, the discovery, despite the immense possibilities it seems to offer, will not answer India’s hunger for lithium for some time to come. Hence, the country needs a viable long-term strategy to source lithium as it explores alternatives to hydrocarbons, much like the rest of the world.

The need to reduce dependence on China

While China produces just over 10% of the world’s raw lithium, it controls lithium refining, accounting for 60% of global lithium-chemical processing. India is among the largest importers of lithium batteries, sourcing almost all of them from China.

Clearly, India would want to cut its dependence on its hostile neighbour. That would essentially mean forging a two-pronged strategy: India must embed itself in the lithium supply chain process by getting into refining. And, in the long term, encourage its private sector to enter exploration and mining.

How India can move up the lithium value chain

Exploration is a long-term lithium play, and may not necessarily yield striking results. The experience with hydrocarbons is instructive. For years, India has made efforts to make new discoveries in oil and gas and cut dependence on imports, but has not made much headway. Also, mining lithium takes a toll on the environment as well, and that’s a big stumbling block.

Lithium-ion batteries need lithium processed into lithium hydroxide or lithium carbonate. And that is China’s turf. Over the next five to ten years, India must encourage its private and public sectors to enter lithium refining.

There is growing concern in the West over China’s dominance in refining. There will be worries that China could use its lithium supplies to give preferential treatment to its own industry and possibly use it as a strategic weapon as well. And, in any case, the explosion in the demand for lithium makes it imperative for refining hubs to emerge in other parts of the world.

At a time when friendshoring and nearshoring are becoming buzzwords, many countries are looking at alternatives to China as a source of lithium. Already, Australia – the larger producer of raw lithium – and Germany, among many others, are making efforts to set up processing facilities. India must join the bandwagon to secure its long-term interests. It would mean forging tie-ups with other countries for access to technical knowhow.

As a proxy, think of India’s success story with covid vaccines. Its home-grown companies Serum Institute took the recipe from abroad and made vaccines for India first, and then the world. It’s a formula India must explore with lithium as well.

The long-term goal

India needs to encourage its private sector to enter mining and exploration of lithium, both in India and abroad, seeding a startup ecosystem around lithium. It may need an amendment to existing laws.

Meanwhile, India’s PSUs are already scouting for lithium assets overseas. The Ministry of Mines has created a joint venture of NALCO, HCL and MECL – Khanij Bidesh India Ltd or KABIL – to identify and acquire overseas lithium and other assets of critical and strategic nature. In March 2022, KABIL inked an agreement with the Australian government to jointly scout for and invest in lithium and cobalt mineral assets. India must ensure the pact doesn’t remain on paper.