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Modi Government’s huge step to Check-Mate the OIL lobby and China, and make India an ‘Energy Giant’

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India is at a very critical juncture, with its massive 1.2 billion strong population, India is desperately needs energy to fuel its economic growth. India’s demand for energy is expected to grow by whooping 95 per cent by 2030.

It is very much known that India does not possess sufficient energy resources to cater to either current or future requirements. In 2029 – 2030 at 6 percent GDP growth demand will peak at approximately 255,000 MW and 295,000 MW at 9 percent growth.

If things go like this then India will, therefore, remain a net energy importer for the foreseeable future. While coal will remain India’s main energy source, there will be a growing use of gas. Here, India is at a crossroads, where we have to decide once and for all to reduce our dependency on traditional sources or non-renewable sources of energy like Oil. The biggest chunk of our energy requirements is fulfilled by the Oil import and a larger chunk of that is for automobiles.

If India wants to keep its interests intact, then we have to reduce our dependency on OPEC nations for our energy requirements. At the same time, we must invest in non-traditional energy (Batteries or EVs) resources, where other nations like China has already taken a lead.

So, here the question is…Is the Indian Government doing anything in this regard? Well, here the answer ie a big ‘Yes’ and we will provide further information in this article.

What Modi Government is doing to address the Energy Concerns?

In August 2019, the Indian Government initiated to fulfill the long-awaited dream to acquire strategic mineral assets abroad as National Aluminium Company Ltd (NALCO), Hindustan Copper Ltd (HCL), and Mineral Exploration Corporation Ltd (MECL), the three CPSEs under the Ministry of Mines, Government of India, signed a Joint Venture Agreement to form Khanij Bidesh India Limited (KABIL), which has a mandate for acquisition, exploration & processing of strategic minerals abroad for commercial use and for supplying to meet the domestic requirements.

Earlier in Feb 2019, NITI Aayog had cleared the proposal to form the JVC by the three CPSEs to acquire minerals that are not available in India. KABIL will be amongst a handful of Companies in the Country for the acquisition of mineral assets abroad.

What KABIL will do to make India an Oil Independent and Energy Giant country?

KABIL is formalized along the lines of ONGC Videsh, which buys oil and gas assets abroad and creates strategic assets for India to cater to our energy demands. KABIL will help India to build a strategic reserve of ‘key minerals’. For instance, India has no known sources of lithium and cobalt, two critical elements that go into batteries that not only power consumer electronics like mobile phones, laptops et al but also electric vehicles (EVs), the future of transport.

As per Mckinsey report, the growing adoption of EVs and the need for EV batteries with higher energy densities will see a huge demand for lithium in the future, it is evident as there has been a massive increase expected of more than 300% between 2017 and 2025. Cobalt’s demand will increase by 60 percent over the same period of time. This report states that lithium-ion-battery technologies will be the prevalent battery technology for the foreseeable future, and any country which holds these resources will have a unique strategic and economic advantage in the future. Here, it is important to state that, India is one of the largest importers of these batteries, importing nearly $150 million worth of them in 2017 and this import is rising with the increasing usage of Battery operated vehicles (EV). As a Nation, it is extremely critical for us to have access to these two important commodities to gain Energy Supremacy in the future.

India’s gain and OPEC’s loss

As India has initiated a big push to move towards renewable sources of energy and EV is also gaining momentum, it is very much obvious that India’s reliance on the Oil producing nations is going to be reduced in the next decade. If we talk about the facts, then India was the third-largest crude oil importer in the world in 2018. India spent an estimated ₹8.81 lakh crore (US$120 billion) to import 228.6 million tonnes of crude oil in 2018–19.

This is such a massive amount and it shows how much dependence we have on Oil Lobby. Any slight change in the rates can disturb the Financial discipline of the Government, we have seen this recently when Oil price was increasing and it was hitting the profit margins of Indian Oil refineries and hitting the CAD and several other parameters of the Government. It is certainly beneficial for us to reduce our dependence on OPEC countries, and Indian Government’s push for EV is certainly a step in the right direction and by 2030 we can expect a huge reduction on our oil import bill.

How China has become the World’s Biggest Battery Producer??

China is dominating the world’s production of new generation batteries that are used in electric vehicles and most portable consumer electronics such as cell phones and laptops. Demand for such batteries is growing and most of those batteries will be lithium-ion, which are also popular for cellphones and laptops because of their high energy per unit mass relative to other electrical energy storage systems.

Here it is important to note that in 2019, Chinese chemical companies accounted for 80 percent of the world’s total output of raw materials for advanced batteries. China controls the processing of pretty much all the critical minerals–rare earth, lithium, cobalt, and graphite. Of the 136 lithium-ion battery plants in the pipeline to 2029, 101 are based in China. The largest manufacturer of electric vehicle batteries with a 27.9 percent market share is China’s Contemporary Amperex Technology Co. Ltd. (CATL) founded in 2011.

In addition to rare earths, the manufacturing of lithium-ion batteries depends on key materials like graphite, cobalt, manganese and nickel. In 2019, China produced 64 percent of the world’s graphite, having 24 percent of the world’s reserves.

It is interesting to note that China has only 1 percent of the world’s cobalt reserves, but it dominates in the processing of raw cobalt. The Democratic Republic of Congo (DRC) is the source of over two-thirds of global cobalt production, but China has over 80 percent control of the cobalt refining industry. China owns eight of the 14 largest cobalt mines in the Democratic Republic of Congo and they account for about half of the country’s output.

China is among the five top countries with the most lithium resources and it is aggressively buying stakes in mining operations in Australia and South America where most of the world’s lithium reserves are found.

China has focused on building capacity at every stage of the battery supply chain, and its long-term goal is to control the processing of almost all of the critical minerals and create a rare kind of dependency in the energy sector. China’s approach recognizes that you do not need to own the raw material sources to control the global flow of trade in the supply chain.

Will India win this ‘War Of Energy’ against China?

As of last year, India was the largest importer of Lithium-ion batteries, which are used in portable electronics like smartphones, tablets, and Vehicles. Since 2016, the battery import has been increased 400% times and India bought batteries worth 1.2 billion USD in 2019-20. Unfortunately, the largest chunk of this business went to China due to India’s dependency on them.

India has initiated the action at war footing. India has started acquiring strategic mineral assets like Lithium and Cobalt in African and South American countries. KABIL has already reached out to Argentina, Chile, and Bolivia that are the top three countries with the largest lithium reserves in the world, and signing up Preferential Trade Agreement (PTA) with these nations.

Australia also wants to collaborate with India and initiate a Government agreement to export Lithium to India. Australia is one of the largest producers of Lithium and it has a reserve of more than six million tonnes. India is ready to leverage these supplies and Australia is ready to offer them.

Indian Government has initiated a massive Lithium resource exploration drive within India as well. Recently a lithium reserve has been discovered by the researchers of the Atomic Minerals Directorate, a unit of India’s Atomic Energy Commission at Mandya, a city located 100 Km away from Bengaluru. The researchers have estimated that Mandya has around 14K tonnes of lithium reserves. 

Bharat Heavy Electricals (BHEL) and Libcoin are already working form a world class consortium to initially build 1GWh lithium ion battery plant in India. This consortium to initially build 1 GWh lithium ion battery plant and capacity will be scaled up to 30GWh in due course of time.

India is all set to build its first Lithium refinery in Gujarat, where a state-owned company is ready to invest one thousand crore Rupees for this venture.

Conclusion

India has started off late but it is catching up now and taking all the necessary steps to enhance its Battery manufacturing capabilities by forming an alliance with mineral producing countries, occupying assets in a foreign land, setting up factories in India to manufacture batteries, and exploring the local reserves as well.

India has initiated the step in the right direction and we can expect an intensifying fight in coming years, and India can gain the dividend of its thriving democracy and stability and may win this war in long term. For now, we can only hope for the best and laud the efforts of the Modi Government.

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