India is likely to sign a preliminary agreement with Mongolia in the area of geology and exploration, a government official told Reuters on Thursday.
India is one of the top consumers of copper and minerals used in power, construction, and electric vehicles.
Mongolia has a lot of deposits of copper and coking coal, while India is mostly dependent on imports to meet its rising demand for these commodities.
According to the source quoted by Reuters, India’s cabinet has approved the memorandum of understanding, and both countries are expected to sign the document soon.
Indian mining companies such as Hindalco (NS:HALC), Adani, and Vedanta (NS:VDAN) have earlier expressed interest in importing copper from Mongolia, according to the report.
Trade route
Additionally, both India and Mongolia have been working on a trade route to supply copper and coking coal.
According to the report, India is said to prefer the route from Vladivostok in Russia despite the longer distance.
The government official told Reuters:
China is convenient but we prefer the route from Russia.
India and China have been at loggerheads since a deadly military confrontation on their disputed border in 2020.
However, both countries had reached an agreement to pull back troops from their last two stand-off points in Western Himalayas.
Avoiding the trade route from China could also be a strategic move by the Indian government.
India’s ties with Russia are cordial and have been strengthened over the last couple of years.
India started shipping crude oil from Russia in March 2022 after western powers imposed heavy sanctions on Moscow’s oil exports to limit its war efforts against Ukraine.
Before the war broke out in February 2022, Russia only accounted for 2% of India’s total crude oil imports.
Superior quality
The government official told Reuters that Mongolia can supply India with superior grades of coking coal.
In November last year, India’s JSW Steel (NS:JSTL) and the government-owned Steel Authority of India (NS:SAIL) were in talks with Mongolian authorities.
Both companies wanted to import two shipments of coking coal from Mongolia, Reuters had reported previously.
According to reports, India is exploring lithium in the Himalayan region of Jammu and Kashmir, and expects it to be ready to be auctioned in two months.
The government has launched multiple auctions of critical minerals as a part of its push toward cleaner energy alternatives and also plans to offer financial incentives for extraction of such minerals.