Explainer: Why India's lithium deal with Argentina is important to reduce dependence on China

India signed pact with Argentina to explore, develop lithium blocks

The central government announced on January 15 that it signed an agreement with Argentina's state-owned mining and energy company to explore and develop five lithium blocks in the Catamarca region. The agreement between Khanij Bidesh India Ltd (KABIL) and Catamarca Minera Y Energética Sociedad Del Estado (CAMYEN), is the first-ever lithium exploration project initiated amid India's quest to boost its critical minerals supply.

Moneycontrol explains why this deal is important and beneficial for India.

What is the deal? 

KABIL, which is a joint venture between NALCO, Hindustan Copper Ltd (HCL) and Mineral Exploration Corporation Ltd (MECL), has received exclusive rights for the exploration and development of five lithium brine blocks, spread around 15,703 hectare in Argentina's Catamarca province. KABIL will infuse Rs 200 crore into the project and is also preparing to set up a branch office.

The deal will allow KABIL to evaluate, prospect and explore and subsequent to the discovery of lithium mineral bag exploitation rights for commercial production, according to the Ministry of Mines.

Why is lithium important?

Lithium, often referred to as "white gold" due to its market value and silver colour, is one of the most sought-after minerals globally. The metal goes into the batteries of electric vehicles (EVs), wind turbines, and electronic (smart) grids, all of which lower global CO2 emissions.

Lithium-ion batteries are said to have a low environmental impact because they do not use substances such as cadmium, lead, and mercury as materials. With high energy density and longer life span, rechargeable lithium-ion batteries are poised to be the dominant energy source in the future.

Why is the agreement with Argentina significant? 

The deal is critical to India's ambitious green energy goals as lithium finds usage in sectors like EV, lithium-ion batteries, and mobile phones, among others. The country is striving to reach 500 gigawatt of installed electricity capacity through non-fossil fuel sources by 2030.

What are Indian companies doing to secure lithium supplies?

India, being the largest importer of lithium in the world, faces significant challenges in securing a stable supply of raw materials for battery cells. Growing demand for electric vehicles amid the government's green mobility push has led to EV startups heavily relying on imports, particularly from China, for lithium-ion batteries and cells due to limited local cell manufacturing.

Besides, lithium-ion battery recycling is also taking shape to address the supply issues. Attero Recycling, an electronic waste recycling firm, aims to recycle 300,000 tonne of lithium-ion batteries within the next five years, according to a media report.

How will the agreement help Indian mining companies? 

The deal will provide a platform for NALCO, HCL and MECL to understand the technical know-how of lithium exploration and extraction. Technical and operational experience is crucial for Indian mining companies given the lack of knowledge/ equipment that persists in the industry.

Recently, the country listed 30 minerals as critical, but the majority of companies would be venturing into the exploration and mining of minerals such as cobalt, copper, lithium, molybdenum, nickel, and rare earth elements, for the first time.

In a report in June, KPMG noted that India is still at a nascent stage for mining/exploration of critical minerals and added that the mining and metals industry as a whole, especially with regard to critical minerals, is entering uncharted waters.

What are the geostrategic advantages from the deal? 

India imported 70 percent of its lithium-ion requirements from China in 2020-21, according to government data. The deal will facilitate supply chain diversification and reduce reliance on China amid strained ties between both countries. The deal also underscores India's move to join the Minerals Security Partnership (MSP) last year. MSP seeks to offer an alternative to China's dominance in mining and processing critical minerals.