Securing India's energy transition

Policy changes may be needed to attract big players in mining and exploration

One of the outgoing government’s initiatives that has garnered less attention than it deserves has been its effort to secure critical minerals that are needed for India’s energy transition targets. A report in this newspaper last week highlighted India’s efforts to sign new agreements or update older ones with a dozen African countries.

Earlier this year, the Indian government signed an agreement with Argentina to acquire five lithium brine blocks for exploration and development in that country. The lithium exploration deal with Argentina is a step towards securing lithium supplies needed for electric vehicle (EV) batteries.

A few months ago, the government made efforts to attract private miners — both domestic as well as global — to take up critical mineral exploration blocks within India. Though the auction for the 20 critical mineral blocks on offer finally needed to be scrapped last month, possibly because of lukewarm interest from bidders, it showed that the government recognised the criticality of securing the critical minerals.

The new government that will take charge shortly will need to continue and accelerate these initiatives. It will also need to make policy tweaks to ensure that we are more successful in our efforts than we have been in the past. In the past half-decade, though the outgoing government recognised the problem of India being too dependent on imports, primarily from China, for critical minerals, the solutions it has tried out have been less successful.

Solar panels and EV batteries need minerals like lithium, cobalt, nickel, cadmium, germanium, niobium, beryllium, vanadium, and many others. Lithium often gets more media attention because Li-ion battery chemistry is dominant in the current generation of EVs, apart from powering all mobile phones and tablets. The other minerals are required in lower quantities, but each of them is a critical component in the energy transition journey. For almost all of these minerals, we are dependent on imports—specifically, imports from China.

India has been late in grasping that its energy transition goals are vulnerable due to its reliance on supplies from China. It is not the only country that has belatedly come to realise this. Even the US has only just woken up to the fact that it has let China dominate the critical minerals supply chain. China is not the leader when it comes to proven reserves in most of these critical minerals, but it has spent decades building up relationships with mineral-rich countries in Africa and Latin America. Chinese companies have secured mining rights in mineral-rich but economically poor nations — while the US, Europe, and even Australia have been tardy to move on these opportunities. China has also built huge capacities for the processing and refining of these minerals — which means that almost all these critical mineral ores, from lithium to cobalt to rare earths — go to China for processing after being mined in different geographies.

For India, becoming independent of China for critical mineral supplies will involve a three-pronged effort. The first involves exploration and geological studies to see if India has reserves of one or more of these critical minerals. In the past, the conventional wisdom was that India lacked these minerals. However, the truth is that simply not enough exploration has taken place till now because the requirement of these minerals was low.

According to reports, the outgoing government asked the Geological Survey of India (GSI) and other agencies to accelerate exploration of India’s land mass of 3.2 lakh sq km, and also use new data sources as well as new technologies. This is much needed because the GSI last year discovered inferred lithium reserves of 5.9 million tonnes in J&K because of fresh exploration. The new government needs to also increase the ambit of minerals being explored — for example, currently White Hydrogen deposits are not being actively explored and yet they may be present within India’s geographical borders.

Of course, not all reserves that are discovered can be developed and extracted — some of the reserves may be discovered in ecologically sensitive regions and others may fall in regions that may be considered no-go because of security or other concerns. And then, the government needs to analyse why auctions often do not generate enough interest. Policy changes may be needed to attract big players — with both the Centre and state governments working together on clearances before any auction takes place, and also looking at royalty payments. 

Securing mining leases abroad for critical minerals is the second part of the equation. Whether India discovers enough reserves of critical minerals within its geographies or not, having multiple sources of supplies is always better. China and others recognise this. Many European countries, as well as the US, do not want to develop some of their own lithium reserves because of environmental concerns, preferring to source the mineral from Latin America and Australia.

Finally, the new government needs to give strong incentives to start building refining and processing capacities within India for these minerals. There is no point in sourcing raw minerals if they then have to be sent to China or other countries for refining and processing.

Securing critical minerals for India’s energy transition is essential — and the new government must ensure that it gives it the attention it deserves.

The writer is former editor of Business Today and Businessworld and founder of Prosaic View, an editorial Consultancy