Budget targets rare-earth self-reliance with corridors, duty exemptions

Budget 2026 announces rare-earth corridors and waives customs duty on mineral processing equipment, aiming to cut import dependence and secure supply chains vital for EVs, renewable energy

What did Budget 2026 announce on rare earths and critical minerals?

 

Finance Minister Nirmala Sitharaman on Sunday announced dedicated rare-earth mineral corridors across key coastal states and a basic customs duty (BCD) exemption on capital goods used for critical mineral processing, as the government moves to strengthen domestic supply chains for strategic minerals.

 

Presenting the Budget for 2026-27, Sitharaman said the Rare Earth Permanent Magnet (REPM) manufacturing scheme, launched in November 2025, will be supported by rare-earth corridors in Odisha, Andhra Pradesh, Kerala and Tamil Nadu. The corridors will focus on mining, processing, research and manufacturing of rare-earth elements.

 

 

How will customs duty changes support mineral processing?

 

The Budget also proposes exempting imported capital goods required for critical mineral processing from basic customs duty, which currently stands at 7.5 per cent. “Once we identify and are able to explore these minerals and process them and make them available for us, our dependency on external sources for bringing in rare earths will be lower,” Sitharaman said during the post-Budget press conference.

 

She said industrial corridors are critical for supply chains and the country needs a predictable supply of minerals and rare-earth elements for manufacturing in areas such as lithium-ion batteries, automobiles and new-age solar technologies.

 

Why are coastal rare-earth corridors important?

 

“The coastal areas are rich in these minerals. We have spoken to states. We thought it was very important to recognise the corridor and give a policy for it, so that industries can invest, the private sector can come in, and the government, states and Centre can come together on it. Looking at the success of the defence corridor, I can confidently say these rare-earth corridors will make a big difference to the economy,” the finance minister said.

 

The rare-earth push builds on the Rs 7,280-crore scheme approved by the Union Cabinet last November to promote domestic manufacturing of sintered REPMs, which are widely used in electric vehicle motors, wind turbine generators, consumer electronics and defence systems.

 

How dependent is India on rare-earth imports?

 

Despite having a strong resource base, India remains heavily dependent on imports for permanent magnets. Official trade data shows that China accounted for between 59.6 per cent and 81.3 per cent of India’s permanent magnet imports by value, and 84.8 per cent to 90.4 per cent by quantity, during 2022-23 to 2024-25.

 

India’s rare-earth resources are largely embedded in monazite-bearing beach sand minerals found across several coastal and inland regions of Andhra Pradesh, Odisha, Tamil Nadu, Kerala, West Bengal, Jharkhand, Gujarat and Maharashtra. These deposits contain an estimated 13.15 million tonnes of monazite, holding about 7.23 million tonnes of rare-earth oxides, the key raw material for downstream industries such as permanent magnet manufacturing.

 

What do industry and analysts say about the proposal?

 

A senior executive from the Federation of Indian Mineral Industries (FIMI) said the proposed corridors could unlock a broader set of minerals beyond rare earths. “The corridors are expected to boost not only monazite-based rare-earth production but also associated beach sand minerals such as garnet, rutile and titanium-bearing minerals,” the official said, requesting anonymity. “This initiative can significantly strengthen domestic supply chains, reduce heavy import dependence and lessen reliance on China,” he added.

 

Companies in the processing space welcomed the duty exemption. “Until today’s announcement, capital goods for mineral processing generally attracted a basic customs duty of around 7.5 per cent,” said Rajat Verma, founder and chief executive officer of Lohum. “The BCD exemption directly reduces upfront capital expenditure, allows faster capacity scaling, and levels the playing field against global incumbents in China and East Asia, where lower equipment costs have historically given them a competitive edge in mineral refining,” Verma added.

 

Analysts said the government has chosen a pragmatic route by focusing on established mineral sources. “India has been mining monazite for decades through public sector and state-owned entities, giving the country a base to scale up production,” said Rajib Maitra, partner and sector leader at Deloitte South Asia.

 

However, he cautioned that production remains uneven across states due to regulatory and geological constraints. “While deposits remain significant, the heavy mineral content in beach sand has declined over time, especially in Kerala, and production remains limited in states like Tamil Nadu, with Andhra Pradesh only beginning operations,” Maitra said, adding that processing and separation, rather than mining alone, will determine the success of the corridors.