LICO, a rising player in India’s developing battery recycling industry, is ramping up its infrastructure and investment to meet the anticipated surge in demand for electric vehicle (EV) batteries, even as it navigates a domestic recycling landscape plagued by inadequate government support and widespread fraud.
The company is currently focused on mechanical separation (Phase 1), which involves processes like crushing, grinding, and sieving batteries into a powdered material known as “black mass.” Its main facility in Vemagal, near Bengaluru, currently boasts a capacity of 17,000 to 18,000 metric tons per annum. The company has already invested over Rs 80 crores in the business, covering capital expenditure and working capital.
Looking ahead, Gaurav Dolwani, Founder and CEO of LICO Materials, outlined that the critical Phase 2 involves expansion of capacity while setting up a hydrometallurgy plant, a chemical treatment facility, by late 2026 or early 2027 to extract high-purity metal salts, such as lithium, cobalt, and nickel. This expansion phase is expected to eventually lead to a total downstream investment of around Rs 400 crores. “We plan on spending another 60 to 65 crores in our phase one of downstream and ultimately taking it up to about 400 crores to do our entire downstream end-to-end.” Dolwani said.
Anticipating heavier inflows of large-format EV batteries, LICO also plans to establish a second mechanical separation unit in North India, potentially by 2027 or 2028, with a capacity of 20,000 to 25,000 metric tons per annum, minimizing high transport costs for heavy battery packs, he added.
Beyond core recycling, Dolwani emphasized LICO’s push to repurpose usable cells and modules from end-of-use EV batteries to create energy storage packs. This “second-life” application can extend the battery’s productive life by three to five years before it must be crushed for recycling. These repurposed packs are being used for various applications, including industrial backup, diesel genset replacement, and power for clinics and schools.
The company also leverages a highly synergistic approach within its broader corporate group to achieve true circularity. LICO is collaborating with its sister company, Epsilon (which produces anode/cathode materials), to develop a solution for graphite recycling, a critical component that makes up 30% of a battery’s volume. Additionally, LICO is working with Averta, a new group company manufacturing chargers, to combine second-life battery packs with chargers, particularly for highway applications, to maximize uptime where grid reliability is low.
Policy Push, Supply Chain Gap
These plans, however, face challenges in a policy landscape that many formal recyclers consider inadequate for addressing the needs of the entire supply chain. The government, in September, announced a Rs 1,500 crore incentive scheme for critical mineral recycling to master the circular economy. The scheme, operating under the National Critical Mineral Mission (NCMM) framework from fiscal year 2025-26 to 2030-31, targets the establishment of at least 270 kilotons per annum of recycling capacity. This capacity is expected to yield approximately 40 tonnes of critical minerals annually, potentially addressing 30-40% of India’s domestic lithium demand by 2028. However, formal recyclers argue the policy is incomplete.
The primary objective of the NCMM incentives is to encourage companies to set up facilities. However, the core challenge is capacity utilization as finding sufficient volumes to feed the plants is difficult, as the back-end supply chain remains largely underdeveloped.
Furthermore, to qualify for incentives, recyclers must produce material with 99% purity, close to battery-grade quality. Recyclers note that there is no domestic market for this high-purity output because precursor, cathode, and anode manufacturers, the next steps in the battery production chain, are currently missing in India.
Consequently, high-purity materials must be exported, often to places like China. Industry experts contend that the policy only supports capacity without fostering the entire supply chain, which includes higher capital expenditure businesses than recycling. They warn that this approach risks turning the incentive program into merely a way to claim government money rather than genuinely helping the country achieve circularity, a process estimated to take five years.
The Shadow Informal Sector at Works
A major constraint on the formal recycling sector is the overwhelming dominance of the informal market, particularly for batteries from personal devices, two-wheelers, and three-wheelers. The informal sector, largely centralized in Delhi, processes an estimated 20,000 tons per annum, a figure at least 60% higher than the current formal market output.”Last year, it (the formal sector) would have been 80% lesser. The year before, it would have been negligible,” the top executive continues.
The scale of the challenge becomes evident in the numbers: For instance, India’s battery recycling market, valued at $152.68 million in 2025, is projected to reach $235.57 million by 2030 at a CAGR of 9.06%, as per a report by Mordor Intelligence. Yet recyclers collected only 2,570.26 metric tonnes of lithium-ion waste batteries from electric vehicles in the last three years, as per government records until April 2025. It is just a fraction of what will emerge as the current generation of EVs reaches end-of-life.
Industry insiders point out that the formal recyclers face significant risks when dealing with this market, including concerns over safety (such as fires during transit), potential fraud (receiving less valuable material than promised), and the burden of paying full Goods and Services Tax (GST) when the informal suppliers do not. Recyclers are actively pushing the government to adopt the Reverse Charge Mechanism (RCM) for GST payments, which would allow the formal recyclers to pay the tax directly, relieving them of accountability for their suppliers’ non-compliance.
Furthermore, adding to the collection woes, automotive producers sometimes act as speculators, holding onto end-of-life batteries indefinitely while waiting for commodity prices (like cobalt) to increase, leading to a call for defined deadlines (e.g., 60 or 90 days) for batteries to be handed over to a recycler.
While the supply challenge remains, the recycling industry now is also witnessing another headwind in the form of the alleged flawed implementation of the Extended Producer Responsibility (EPR) framework. The system currently allows companies to self-enter data regarding recovery and sales, leading to “paper trading”, where the same material is allegedly claimed multiple times, the industry experts reveal. .
Becoming the Next CATL or POSCO
As the global battery recycling industry draws inspiration from leading models like China’s CATL and its subsidiary Brunp, as well as South Korea’s POSCO, which showcase advanced technical capabilities, extensive operational scale, and seamless integration throughout the battery supply chain, LICO, on its part, is looking to develop the same in India. “Every time I visit them, I feel that it’s an education for us. We get to learn so much,” Dolwani added.