Does India have key Resources to set up Lithium-ion Battery projects domestically?

The year 2019 has proved to be a game changer for the Indian automobile sector with government's announcement of INR 10,000 crore for Phase 2 of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles, or FAME 2 scheme, to boost electric mobility and increase the number of electric vehicles in commercial fleets.

The FAME scheme was first launched in 2015 but nothing major was achieved in time span of four years (Apr'15 - Mar'19) with 90% of vehicles produced being electric scooters. Also, these vehicles majorly used antiquated lead-acid batteries instead of modern lithium-ion ones. Subsequently with small enterprises cashing on the incentives and no major action being taken by the large automakers, Indian government hit back through a stricter move this year. Its Bharat Stage standards regulate the emission of air pollutants from motor vehicles. On April 1, 2017, the Indian government had made Bharat Stage-IV standards compulsory. The failure of its FAME-India policy made the government leapfrog Stage-V and move straight to Stage-VI emission standards last year. The Indian Supreme Court upheld the government's Bharat Stage-VI decision that comes into effect on April 1, 2020 and this might dampen demand for petrol or diesel automobiles going forward.

Now with BS VI norms and FAME II policy which aims to have 30% of India's vehicles powered by lithium-ion battery in another 10 years the Indian automakers have to gear up for the new range of electric vehicles and also have to secure supplies of its key raw material lithium-ion battery required to run it.

The scanty lithium and cobalt reserves

While Indian auto majors are focusing on developing electric vehicles amid still-low demand for the same, many international as well as domestic companies have shown interest to set up lithium-ion battery plant in India. But the big question that is hovering is does India has enough reserves of lithium and cobalt which are the two key raw materials for battery production.

The Indian government estimates its cobalt reserves to be just 44.9 MnT and has also admitted that "there is no production of cobalt in the country from indigenous ores." In fact, production of cobalt declined in the early part of this decade from around 1,187 tonne in 2010 to 580 tonne in 2012. India imported the ore to refine this cobalt and then imported more cobalt in refined form to meet the domestic demand. The top cobalt producers across the globe include both China and Japan. They have been astute in acquiring mines in different parts of the world and developing global supply chains.

Indian government's strategic move

However, now with the anticipated increase in demand for lithium and cobalt, the Indian government has instructed three state-owned companies to team up for a new venture which will scout and acquire strategic mineral assets (lithium and cobalt) abroad.

As per the market reports, the key partners in this joint venture are National Aluminium Company (Nalco), Hindustan Copper (HCL) and Mineral Exploration Corp. Ltd (MECL). This proposed joint venture is currently awaiting a few approvals before it can be operationalised and is likely to be formalised along the lines of ONGC Videsh, which buys oil and gas assets abroad. The modalities of the venture will be worked out later, but the joint venture could partner Indian mining companies or join hands with local mining entities abroad and if the JV take off, it will help India to build strategic reserves of key minerals used for battery manufacturing.

Apart from this, Bolivia, known to have the world's largest reserves of lithium, has also offered the metal to India. The country has offered to sign PTA (Preferential Trade Agreement) with India which will provide preferential access to certain products (including lithium) by lowering tariffs.

However, India has to work hard to catch up as indeed, China already has a head start in this race for these strategic commodities, especially in Africa, just as it previously took the lead in its quest for oil and gas. As per media reports, Chinese imports of cobalt from the Congo, the world's biggest producer of the mineral, was around USD 1.2 billion in the first nine months of 2017, compared with USD 3.2 million by India, the second-largest importer.