On 25th July, the Ministry of Mines cancelled the auction of the mineral lithium block located in Reasi district of the Union Territory of Jammu and Kashmir. The reason given behind this was that investors did not show enough interest in it. This was the second consecutive time that the auction had to be cancelled.
Earlier on March 13 this year, the first auction was cancelled because according to the rules, less than three investors had bid in the first round. The very next day after the cancellation of this bidding process, the Ministry of Mines had once again put the lithium block up for auction, but now it too has had to be cancelled.
After continuous setbacks to India’s lithium ambitions, some questions now arise as to why this auction process is getting cancelled again and again, why investors are not excited about this auction, whereas lithium has emerged as a better option for new energy across the world.
About one and a half years ago (in February 2023), the then mining secretary Vivek Bhardwaj had announced the discovery of lithium reserves in Reasi district of Jammu and Kashmir. At that time, he had estimated its reserves to be around 59 lakh tonnes. The estimated figure of a resource means that mineral resource whose quantity, quality and mineral composition are only temporarily evaluated.
However, when such a large deposit was found in Reasi district, it was said that it is one of the largest reserves in the world. Now the deposit has been found, but it was also necessary to acquire it.
The Ministry of Mines held the first auction for this in November 2023. The condition was that at least three buyers (or bidders) would participate in the bidding process in the first round. But this did not happen, and on March 13, this first auction was canceled. The very next day, the Ministry of Mines once again put the lithium block up for auction for the second time. This time the last date for receiving bids was May 14.
But this time too the bidding process could not succeed, and on 25th July the Ministry of Mines cancelled it for the second time in a row. This time there was no rule in the bidding process that a minimum number of three buyers or bidders would be mandatory. Despite this, no eligible bidder was found in the second attempt as well.
In fact, according to the Minerals (Auction) Rules, 2015, if a mineral block being auctioned fails to ensure the participation of at least three technically qualified bidders, it can be put up for auction again as a second attempt. And such auctions require bidding to continue “in the second round even if the number of technically qualified bidders is less than three”.
However, when the Ministry of Mines was asked for a comment on this, it said, “For the first time in the country, auction of important minerals is being conducted. Like any other auction, the auction of important minerals may or may not get the expected number of responses.” The ministry said that in relation to the lithium block in Jammu and Kashmir, the ministry is reviewing what further work needs to be done in this.
Why are investors staying away from the auction?
According to a report by the Indian Express, experts associated with the mining industry say that the lithium ore present in Reasi is in the form of hard rock pegmatite deposits. Talking about hard rock pegmatite, it is a type of igneous rock which is also known as hard rock lithium deposit. Extracting lithium from such deposits and its processing is quite challenging and expensive.
Apart from this, investors are also discouraged by the undeveloped mineral reporting standards used in the tender documents of the Ministry of Mines. According to a document of the Ministry of Mines, when the auction process was being conducted for the first time, many complaints were raised by the bidders. Some of the major questions among these were limited information about the block in the bid document, and the size of the block being so small that it may prove difficult to use modern mineral system-based tools there.
Also, the bidders wanted to know from the Ministry of Mines that if any study has been done by them to assess the feasibility of extracting and processing lithium from these ores, then it should be shared with them. To this, the ministry replied ‘no’. Experts also say that India’s current resource classification law is mainly based on the United Nations’ Framework Classification for Resources (UNFC).
UNFC provides limited information to determine the economic value of a mineral. Whereas from the economic value point of view, bidders need to have a lot of information, because the process of extracting minerals is very expensive and difficult. In simple words, they need to see profit after investing. Apart from this, the prices of lithium minerals are falling all over the world, and bidders do not want to reduce their margins. This is also a reason why they are keeping distance from it.
According to experts, to attract private bidders in the sector, the government should adopt CRIRSCO (Committee for International Reporting Standards on Mineral Reserves) instead of UNFC, which is a globally recognised body for mineral reserves reporting standards.
Why is Lithium considered one of the most sought-after minerals
Lithium (Li), sometimes known as ‘white gold’ due to its high demand for rechargeable batteries, is a soft and silvery-white metal used extensively in electric vehicle (EV) batteries, energy storage systems and consumer electronics. Chile, Australia and Argentina are the top countries with lithium reserves.
If we talk about India, before the discovery of lithium reserves in Reasi district, we had limited quantity of this mineral available, and at present India is mainly dependent on imports for its use. However, now after the discovery of this reserve, India is probably the country with the seventh largest lithium reserves in the world.