INDIA STRIKES WHITE GOLD – IMPRI Impact and Policy Research Institute

Mahek Agarwal

ABSTRACT

On February 9, 2023, the Geological Survey of India struck gold in the foothills of the Himalayas in the form of 5.9 million tonnes of lithium reserves in the Reasi district of Jammu and Kashmir. This discovery comes at a crucial time as the world is moving toward more sustainable energy, and lithium-ion batteries are integral as they power phones, laptops and, most importantly, automobiles.

BACKGROUND

Lithium is a silvery-white alkali material and the primary component in lithium-ion batteries that power phones, laptops and EVs. Lithium is often referred to as “white gold” because of its high demand and relative scarcity. So much so that, in the last 2 years, its price has soared by 900%. Before February 2023, 5 countries largely controlled all the lithium reserves- Bolivia, Argentina, Chile, Australia and China but with the recent find, India has replaced China in the 5th position.

WHAT THIS MEANS FOR INDIA

For now, the officials of the Geological Survey of India have put this discovery under the ‘inferred’ category of the G3 stage. This means that the exploration is in the preliminary stage, and they are yet to confirm the quality and viability of the raw material. The GSI still has to go through 2 stages to confirm the feasibility of the reserves. Even after this confirmation, there is a lot of ground to cover.

The process of getting lithium out of the ground economically and then building a mine that can make chemicals for EVs is decades long. Currently, the production of lithium-ion cells is monopolized by Samsung in Korea, Panasonic in Japan and CATL in China, China holding the majority 34% share. If India wants to compete with the giants, it needs to ready itself for some potential roadblocks.

CHALLENGES AHEAD

The first challenge is who will bid and mine the reserves. That’s because lithium, along with seven other metals, including beryllium and zirconium, fall under the Department of Atomic Energy’s restricted list that prohibits private companies from mining or producing it. Last year, the government tried to change the law by allowing private miners to extract lithium.

Second, India has no company specializing in the lithium mining space. Unlike iron or copper mining, lithium mining is very different. This will require bringing in foreign support in the form of joint ventures or local subsidiaries.

Another major challenge facing the government will be the environmental impact, as lithium mining is also environmentally challenging. According to International Energy Agency (IEA) estimates, production of LCE (Lithium Carbon Equivalent) per ton emits 2.8-9.6 tons of CO2.

Additionally, the production of one ton of lithium can require around 500,000 gallons of water which puts the Riasi village in a difficult position as they are already facing severe water shortages. Additionally, if the mining activity submerges the Lithium Mountains in the Salal valley by even 2 inches, it will alter the course of the Chenab River and lead to potentially catastrophic flooding in Riasi.

WAY FORWARD

The federal government is not sitting on this opportunity and has already started auctioning mining rights at a 3% royalty of the LME (London Metal Exchange) price of lithium. “According to a source at Reuters, Indian and foreign companies such as Adani Enterprises, Vedanta Ltd, Reliance Industries, Jindal Steel and Power Ltd, Himadri Chemicals and Korea’s LX International are likely to take part in the auction.” The royalty is matched with Argentina’s mining royalty at 3% and will be paid to the local administration of Jammu and Kashmir.

This comes at a crucial time as India is trying to minimise its emissions of greenhouse gases after being placed 3rd on the list of most polluted countries (after the USA and China). In this regard, it has launched FAME or the Faster Adoption and Manufacturing of Electronic Vehicles; to reduce greenhouse gas emissions by automobiles and make India the global leader in EV exports.

With the recent discovery, India might not have to exert its foreign reserves on lithium (1.6 billion GBP in 2022) and can revert to the in-house production of lithium batteries to bring the policy to fruition. However, this will come at a cost of India’s self-reliance because the technology to make use of the resources is in the hands of only a select few countries.

REFERENCES

Lateef, Smaan. 2023. As geopolitically important as oil’: Lithium mining could transform India – but is trouble looming. 15 June 2023.

https://www.msn.com/en-gb/news/world/as-geopolitically-important-as-oil-lithium- mining-could-transform-india-but-is-trouble-looming/ar-AA1cAo0v