Mineral middle: India's Rs 2,814 cr plunge into battery supply race

With the plan for four lithium and nickel refineries, India joins a global race for the middle of the battery supply chain, one that richer economies are finding hard to winOn November 4, the Union cabinet took two decisions that, read together, address both the supply of battery materials and the demand for them. It cleared a Rs 2,814 crore plan to build four large lithium and nickel refineries, including the country’s first commercial-scale lithium plants.The cabinet also approved Rs 14,500 crore in viability gap funding for 92 GWh of grid-scale energy storage, with a domestic content requirement for battery projects. The next day, the Union ministry of mines set out how the refinery money will flow. It also eased the rules for selling critical mineral blocks, cutting the number of technically qualified bidders needed from three to two, and opened fresh auction tranches. One set of moves aims to produce more battery material at home; the other aims to create a market that will buy it.The Capex Support Scheme to Promote Critical Mineral Processing is compact, about a fifth the size of the storage scheme. It will pay 30 per cent of the capital cost of four plants: two lithium refineries of at least 30,000 tonnes a year and two nickel units of at least 50,000 tonnes.Support is capped at Rs 500 crore for each lithium plant and Rs 900 crore for each nickel plant. For each mineral, the two bidders who ask for the least subsidy will win. The money comes in three instalments, and each plant must be commissioned within three years of its award. If it works as planned, the government expects Rs 10,000 crore of investment and 60,000 tonnes of lithium and 100,000 tonnes of nickel capacity by 2030. Prime Minister Narendra Modi framed the decision in strategic terms. Posting on X the day the cabinet approved it, he spoke of greater domestic value addition and stronger supply chains, adding: “India must have capabilities to build technologies of the future.”The cabinet’s own note is more sober about the hurdles. It lists three obstacles to domestic processing: high capital requirements, limited access to technology and constrained access to raw materials. The scheme deals directly with the first. How India handles the other two will decide whether it joins the small group of countries that refine battery metals outside China.The gap the scheme targets has run through India’s battery ambitions for a decade. Geologists went looking for lithium in Jammu and Kashmir and Chhattisgarh. The state-owned Khanij Bidesh India Limited (KABIL) bought exploration rights in the salt flats of Argentina. Factories in Tamil Nadu and Gujarat began assembling battery packs, and a few started making cells. But the step in between, where mined rock becomes the high-purity chemicals a battery actually uses, was left almost entirely to China.That matters because of where the world’s battery chemicals come from. China controls about 65 per cent of global refining capacity for battery-grade lithium chemicals, and Beijing has shown it will use that position. In July last year, it restricted exports of cathode technology and five lithium extraction technologies. Three months later, it announced wider controls on batteries and their materials, then suspended them for a year as part of its trade truce with Washington. That suspension was legally due to lapse on November 10, although Beijing has said the broader arrangement runs until January 10 next year.Other economies have answered in their own ways. The United States has moved from subsidising the sector to owning pieces of it. The Pentagon took a 15 per cent stake in rare-earth miner MP Materials and guaranteed it a minimum price. The Energy Department took 5 per cent of Lithium Americas while restructuring a $2.26 billion loan for its Nevada project. The European Union wants processing within the bloc to meet 40 per cent of its annual demand for strategic raw materials by 2030, but its own auditors say progress has been limited.Indonesia took a blunter route and banned nickel ore exports to force smelting at home. Its energy minister says nickel export earnings rose from about $3.3 billion in 2017-19 to about $34 billion after the ban. Zimbabwe, Africa’s largest lithium producer, is following that playbook and will stop exports of lithium concentrate from January.For India, the stakes are high. The country is fully import-dependent for lithium, nickel and cobalt, according to the Institute for Energy Economics and Financial Analysis (IEEFA). In 2025, it imported 18,200 tonnes of lithium compounds worth Rs 11,160 crore, two-thirds of them from China. Its own lithium refining capacity is effectively nil. Imports of lithium-ion cells, meanwhile, rose 94 per cent to Rs 15,721 crore in the first quarter of FY27.Policy so far has concentrated on the two ends of the chain. Exploration and auctions run under the National Critical Mineral Mission, KABIL hunts for assets abroad, a production-linked incentive (PLI) supports battery cells, a Rs 1,500 crore scheme backs recycling. Even a cell factory built in India would still have run on imported chemicals. The refinery scheme is the first dedicated attempt to fund the middle.It is also a more modest tool than those of India’s peers: a one-time capital subsidy handed out through competitive bidding. The entire outlay, about $300 million, is roughly an eighth of a single US loan to one lithium project. That design limits the exchequer’s exposure and leaves the market to price the risk. It also means a grant paid up front offers no cushion against the price swings that have closed refineries elsewhere.The scheme does not start from scratch. Hyderabad-based Altmin and Noida-based Lohum, both likely bidders, have each announced 30,000-tonne lithium carbonate plans, exactly the scheme’s minimum. Vedanta, India’s only primary nickel producer, already makes nickel sulphate in Goa on a small scale. The choice of carbonate matters. It is the input for LFP (Lithium Iron Phosphate) batteries, which dominate grid storage, and Lohum expects nickel-based chemistries to make up only 30 to 35 per cent of India’s EV battery market. Australia learnt this the hard way. Its three lithium hydroxide refineries were designed when nickel-rich batteries looked set to win, and all three have struggled. In February, Albemarle shut the last working unit at its Kemerton plant.Australia’s experience also points to the first test: cost. An industry analysis reported by S&P Global found conversion costs at three Chinese producers were less than half those at two Western Australian refineries. Industry estimates put the cost of building a refinery in Australia at about 10 times that in China. Construction and labour are cheaper in India than in Australia, but power and reagent prices will shape margins long after the subsidy is spent.The second test is ore. The scheme covers lithium from ores and concentrates, not brines, so KABIL’s five brine blocks in Argentina cannot feed these plants. That leaves spodumene, a hard-rock ore, and more than 90 per cent of Australia’s output already goes to China. Zimbabwe will soon stop shipping concentrate, though it will still export lithium sulphate. For scale, POSCO’s 43,000-tonne lithium hydroxide plant in South Korea is contracted to receive 315,000 tonnes of ore a year. On that ratio, India’s two lithium plants would need well over 400,000 tonnes annually. No Indian company has yet announced supply contracts of that size.The third test is buyers, and here the Union Cabinet meeting offered a partial answer. Over the five years to 2030-31, the storage scheme will back 30 GWh of battery capacity, alongside 60 GWh of pumped hydro and 2 GWh of newer technologies. Battery projects must meet a 40 per cent domestic content requirement. Yet by a common industry rule of thumb, 30 GWh of LFP batteries would contain roughly 16,000 to 18,000 tonnes of lithium carbonate equivalent spread over those five years. That is well short of the 60,000 tonnes a year the refineries are meant to produce.It is not clear whether cells or their chemicals must count towards the 40 per cent. Elsewhere the market is thin. Of the 40 GWh of cell capacity awarded under the battery PLI, only Ola has built any, about 2.5 GWh. Nickel faces a narrower market still, since grid storage relies largely on nickel-free LFP. And Indonesia, which sends 97 per cent of its mixed hydroxide precipitate, a key nickel intermediate, to China, is now restricting new smelters of that kind to push its own industry towards battery-grade products.The fourth test lies in the scheme’s own design. According to the Press Information Bureau (PIB) explainer, each instalment is tied to capital spent, equity contributed and commissioning, not to output or product purity. IEEFA’s review of the battery PLI found that its scoring rewarded capacity, local content and subsidy commitments more than manufacturing experience. The new scheme’s technical screening will inevitably be judged against that record.Behind all four sits a fifth, less visible test: technology. China’s edge is not a single patent. It is the accumulated knowhow to run these plants, tuning acids, temperatures and purification steps to each batch of ore, backed by an engineering industry that builds them fast and cheap. Chinese firms built Indonesia’s battery-grade nickel plants for an estimated $35,000 of capital per annual tonne of capacity, against more than $100,000 at Western plants, according to data analytics firm Wood Mackenzie.Beijing’s export curbs now cover key lithium-processing and cathode technologies. At home, India’s research effort, nine Centres of Excellence under the National Critical Mineral Mission, is aimed at developing indigenous technology. Altmin, which has acquired a lithium refinery and its technology in Brazil, is one of the few likely bidders with a visible route to proven know-how.From here, the story could go three ways. In the strongest case, the winners arrive with a technology partner, long-term ore contracts and committed buyers. That is how the one recent success outside China was built: POSCO brought in Australian miner Pilbara as an 18 per cent partner, locked in ore on a long-term contract and signed buyers such as SK On. In a middle case, the plants are commissioned on time but run below capacity, importing ore and exporting much of what they make while Indian cell manufacturing catches up. In the weakest case, the scheme follows the battery PLI, with awards made on schedule and capacity slow to appear.Which path India takes will depend on decisions still to come. The refinery scheme’s guidelines must define units, eligible feedstock and technical criteria. The storage scheme’s rules must spell out what counts as domestic content. A national stockpiling policy is due shortly, according to the mines secretary. And a Rs 12,000 crore incentive scheme for battery components such as cathodes is being planned. The prime minister has set out the principle. Whether the ore, the technology and the buyers follow the subsidies will decide how far India gets towards making those technologies of the future.Subscribe to India Today Magazine- Ends