African nations offer India lithium as repayment for aid

Several African countries have approached India with offers to service a portion of their development loans in exchange for allowing Indian companies access to their mining operations and allowing exports of highly prized lithium and cobalt, providing a huge boost to India's efforts to secure critical mineral supplies.

In spite of competition from other recipients of Indian development aid through LOCs, Africa has consistently been the primary beneficiary of India's LOCs, which are motivated primarily by economic interests and the pursuit of international prestige. There has been a recent uptick in India's policy engagement with African countries, and it looks like its development assistance to Africa will play an increasingly prominent role in the years to come.

India has practised a policy of aid to developing countries for many years.

  • Capacity-building and training programmes
  • Lines of credit (LOC)
  • Grant aid
  • Bilateral trade and investments are the four key methods that characterise India's development cooperation.

Since 1964, the Government of India has extended Lines of Credit (LOC) to African nations as part of the Indian Technical and Economic Cooperation (ITEC) and Special Commonwealth Assistance for Africa Programme (SCAAP). The Export and Import Bank of India (EXIM) offers Lines of Credit (LOC) as a form of financing.

The EXIM Bank provides letters of credit to finance the export of qualified commodities on deferred payment terms as a means of fostering bilateral, regional, and economic partnerships. The Government of India provides LOCs as part of the 2003 Indian Development Initiative (IDI), which aims to disseminate India's development expertise in the areas of capacity building, trade, and infrastructure development. Current IDI branding refers to it as the Indian Development and Economic Support Program (IDEAS). The Narendra Modi government updated the IDEAS criteria in 2015, and they will remain in effect through 2019-2020.

Following the new rules, nations are divided into three groups:

  • Those having a minimum binding concessional requirement
  • Those without
  • Other emerging nations.

 Please see below the updated credit terms.

Indian LOCs to Africa have changed significantly with the formation of the International Solar Alliance (ISA) on March 11, 2018. The MEA's decision to allocate 15-20% of the total $10 billion LOC, extended under IAFS-III, for undertaking solar energy projects in Africa is in accordance with India's promise to issue LOCs worth $1 billion to ensure the implementation of 23 solar energy projects ranging across 13 African countries.

Several African countries have approached India with promises to pay a portion of their development loans in exchange for granting Indian corporations access to their mining activities and enabling exports of highly sought lithium and cobalt.

The Indian government has requested that the country's domestic metal and mining firms express an interest in the raw materials and other minerals they require for manufacture.

Under the Indian Development and Economic Assistance Scheme, India provides development assistance in the form of concessional Lines of Credit (IDEAS).

Lithium, which is used in lithium-ion batteries for electric vehicles, is abundant in Africa and has become the mineral most in demand.