With the world transitioning to clean energy systems driven by a desire to combat climate change and limit the rise in temperatures to under 2° celsius, India is also following suit. Prime Minister Narendra Modi has already declared that the country will become carbon-neutral by 2070.

This transition to carbon neutrality will be powered by a shift in mobility to electric vehicles (EVs) and power generation via renewable energy (RE). Copper in this respect will be a critical metal in this journey because of its high-intensity usage in clean energy platforms. An average battery EV requires 83 kg of copper, 4x that of a conventional car and more than 3000 kg of copper to generate 1 MW of power via the solar photovoltaic and onshore wind platforms. However, India’s ability to produce adequate quantities of this copper to feed this transition hinges on its ability to secure stable long-term supply of raw material for its copper smelters.

Copper smelters satisfy India’s need for a stable refined copper supply because they convert convert copper concentrate having copper content ranging between 26 per cent to 32 per cent into refined copper cathodes, which have a purity greater than 99 per cent. Sulphuric acid, used as a fertiliser by India’s farmers, is a by-product of this process.

China’s path

Countries like China have taken cognisance of the strategic importance of copper smelters for their economy. In 2005, China had a copper smelting capacity of 2 million metric tonnes per annum, accounting for just 16 per cent of global production. However, in just a decade-and-a-half, China has focused on supporting smelter growth. Its smelting capacity has increased by over 400 per cent to touch 9 million tonnes per annum at present. Today, China has close to 40 per cent of global copper smelting capacity.

This growth of smelting also appears to have had a spillover effect on China’s finished good export. Exports of air conditioners, refrigerators, compressors, cables, and motors, having refined copper as a high value intermediary component, saw a 300 per cent jump from $12.6 billion in 2005 to $52 billion in 2021.

In this backdrop, it is important to know the trajectory of India’s copper security. In 1996, domestic consumption exceeded production by 230 per cent. Fast forward to 1997 and 1998, the commencement of production by copper smelters of Sterlite Copper and Hindalco Industries turned the face of the copper industry in India.

Export surge

The smelters together made India self-sufficient in copper from the early 2000s. India also began exporting refined copper by exporting nearly 4.5 million tonnes from 1996-97 up to 2017-18. This growth by providing India with reliable homemade copper has enabled the finished goods industry to become a $18 billion industry today.

Today, the Indian primary copper industry can produce 1 million metric tonnes per annum and is set to add another 1 million capacities by 2030. Even then, much more is needed to meet the country’s demand, which is forecasted to increase to 4.8 million MT by 2047. India will need 2.8 million metric tonnes of additional smelting capacity. This addition can attract as much as Rs 27,000 crore worth of investments support our vision to “Make in India”. For this to materialize, policy support is vital to mitigate strategic challenges facing this critical industry.

Import dependence

The industry needs to rely on imports of raw material as domestic production can only satisfy 6 per cent of India’s smelter demand. In securing imports, India has to compete with China, Japan, and the European Union. Securing imports has become challenging for two reasons. First, a group of 10 countries account for over 75 per cent of raw material production. Among these, some like Indonesia have stated that they will ban export of raw material to promote growth of smelters. Others like the Democratic Republic of Congo, have also followed suit by banning the export of copper concentrate in May 2021, with a few exceptions. To further compound the problem, the supply-demand gap between production and demand is slated to increase from 3 million tonnes to 8 million tonnes by 2030.

India must identify policy options to overcome this challenge of declining raw material availability. In the short run, India should reduce the most favoured nation (MFN) duty on the import of copper concentrate from 2.5 per cent to 0 per cent. This will allow Indian copper smelters to source raw material from a broader basket of countries in case of export bans by countries like Indonesia, which are a part of India’s present sourcing basket.

In the long run, India can learn from China and Japan as they were in similar positions to India not too long ago. However, China secured its raw material supply of copper by acquiring majority stake in 24 copper mines in mine producing countries. Japan has also acquired a minority stake in five of the world’s largest mines.

India can do the same by expanding the ambit of Khanij Bidesh India Ltd (KABIL), the joint venture company created by the Ministry for international mine acquisition, to include copper as critical acquisition mineral. This will ensure that India secures stable raw material supply in the long run. A stable raw material supply will be a vital first step in making India Atmanirbhar in copper.

The writer is the Deputy CEO of Sterlite Copper

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