India's Race to mine lithium reserve: Challenges and risks ahead

In February this year, the Union Government confirmed the discovery of 5.9 million tonnes of lithium reserves in Jammu and Kashmir. For India, which has been heavily dependent on lithium imports, the reserve can be a game changer. Now, as India hopes to auction the lithium blocks in the northern federal territory of Jammu and Kashmir later this year, there are many challenges that need to be resolved.

The first challenge is who will bid and mine the reserves. The reason is,  lithium, along with seven other metals, including beryllium and zirconium, fall under the restricted list of the Department of Atomic Energy that forbids private players from mining or producing them. Last year, the government attempted to modify the law by permitting private miners to extract lithium, which is a crucial component for batteries used in electric vehicles and energy storage.

Secondly,  India does not have the expertise or any company in the lithium mining space. Unlike iron or copper mining, Lithium mining is very different. As there aren’t any existing lithium mines in the country, mining firms in India don’t have any experience in that, say industry experts.

“So, either a company will have to work with some international company that is already in the lithium business, go into a JV, or get into those kinds of structures, to be able to mine that reserve and then process it,” Akshay Singhal, Founder & CEO of Log9 Materials had earlier told Business Today. This could also prove to be a stumbling block for India.

Thirdly, mining lithium is an expensive proposition. According to a report by S&P, the average total cash cost of operating 11 hard-rock lithium producers was pegged at $2,540 per tonne of LCE in 2019. According to experts, this cost will be over $2500-3000, excluding capital investments.

Another big challenge ahead of the government will be the environmental impact, as mining lithium is also environmentally challenging. As per IEA estimates, the production of per tonne of LCE (Lithium Carbon Equivalent) emits 2.8-9.6 tonnes of CO2. Moreover, the production of one tonne of lithium could require approximately 500,000 gallons of water.

“The [lithium] mining process can have negative environmental impacts similar to other metal mines, including degradation [of soil], water scarcity, tailing dams, and water flow disruptions, unless companies act responsibility,” said Sambitosh Mohapatra, Partner, ESG Leader, PwC India.

Environmentalists fear that unless sustainable mining practices are followed, Lithium extraction will unavoidably increase greenhouse gas emissions. This will also cause soil and water contamination because of the presence of toxic chemicals.

As lithium mining in India is likely to reduce its dependence on China, experts on the condition of anonymity expressed that certain nations could use the environment as an excuse to hamper India’s growth as becoming a Lithium nation.

Given India’s mission to achieve Net Zero by 2070, we hope the government has accounted for the same.

Also read: White gold: Here's why lithium has emerged as priority metal for India