India's strategic ambition to secure its supply of rare earth elements (REEs), crucial for various high-tech industries, faces a persistent challenge: a limited budget allocation for IREL (India) Limited, the country's sole rare earth producer. While the Union Budget 2026-27 has proposed a capital expenditure (capex) increase to ₹12.2 trillion to boost infrastructure, the specific allocation for IREL remains modest in comparison to the scale of the task at hand.
The development of dedicated rare earth corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu, as announced by Finance Minister Nirmala Sitharaman, signals a strong commitment to reducing import dependence and strengthening energy security. This initiative builds upon the ₹7,280-crore scheme approved in November 2025 to promote domestic manufacturing of sintered Rare Earth Permanent Magnets (REPMs), essential components in electric vehicles, wind turbines, and defense systems. The aim is to establish 6,000 metric tonnes per annum (MTPA) of integrated REPM manufacturing in India, positioning the nation as a key player in the global REPM market.
Despite having substantial resources of monazite-bearing beach sand minerals, which contain an estimated 13.15 million tonnes of monazite holding approximately 7.23 million tonnes of rare-earth oxides, India heavily relies on imports for permanent magnets. China accounts for a significant portion of these imports, ranging from 59.6% to 81.3% by value and 84.8% to 90.4% by quantity between 2022-23 and 2024-25. This dependence highlights the urgent need to bolster domestic production capabilities.
The National Critical Mineral Mission (NCMM), launched in January with a proposed outlay of ₹16,300 crore for the period 2024-25 to 2030-31, aims to secure India's critical mineral supply chain. This mission encompasses improving technology, regulation, and financing for exploration, mining, processing, and recycling. Furthermore, the government has amended the Mines and Minerals (Development and Regulation) Act, empowering the central government to auction critical and strategic minerals, including rare earth elements.
IREL, a state-run entity, is central to supplying raw materials for the rare earth corridors. Its Orissa Sands Complex (OSCOM) in Chatrapur, Ganjam district, hosts a Rare Earth Extraction Plant (REEP) with a capacity of 11,200 tonnes per annum of mixed rare earth chlorides. IREL is also developing a Rare Earth and Titanium Theme Park in Bhopal, Madhya Pradesh, featuring a pilot plant based on BARC technologies to encourage entrepreneurship and startups.
To further enhance domestic production, the Union Budget 2024-25 eliminated duties for most critical minerals and reduced Basic Customs Duties (BCD) on others. The 2025-26 budget exempted cobalt powder, lithium-ion battery scrap, and scrap of some critical minerals to support domestic processing. Moreover, the finance minister proposed reducing customs duty on monazite to zero from the existing 2.5 percent.
While these initiatives and policy changes are positive steps, the relatively small capex hike for IREL raises concerns about whether it will be sufficient to address the bottlenecks in the rare earth value chain. The challenges are compounded by China's cost advantage, driven by its large-scale production and integrated value chain. To compete effectively and achieve self-reliance, India needs to significantly scale up IREL's capacity and invest in advanced technologies for heavy rare earth extraction, an area where India currently lags. The establishment of joint ventures, such as IREL IDCOL Limited with IDCOL (an Odisha State Undertaking) and a JV with TAMIN (Tamil Nadu Minerals Limited), are crucial for expanding mining and separation activities.