Budget 2026 backs EV ecosystem with rare earth corridors, battery duty relief

Budget 2026 outlined support for key sectors such as semiconductors, aviation, infrastructure, electronics, tourism and data centres.

“>

Finance Minister Nirmala Sitharaman, in her ninth consecutive Union Budget 2026 presented on February 1, announced targeted measures for the auto industry, with a clear focus on supporting India’s decarbonisation journey through incentives for rare earth materials and tax exemptions linked to lithium-ion batteries.As India advances toward zero-emission mobility, localising critical components such as rare earth materials and strengthening self-reliance remain key priorities. The Budget announced dedicated Rare Earth Corridors in Odisha, Kerala, Andhra Pradesh and Tamil Nadu. A Scheme for Rare Earth Permanent Magnets, launched in November 2025, has also received an additional push. “We now propose to support the mineral-rich states of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to establish dedicated Rare Earth Corridors to promote mining, processing, research, and manufacturing,” Sitharaman said.These initiatives aim to cover the entire value chain—from mining and research to processing and manufacturing—helping build stronger domestic capabilities in critical minerals and advanced materials. The Centre had earlier notified the Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets (REPM) with a total outlay of ₹7,280 crore.The measures come amid geopolitical disruptions and restrictions on raw material supplies from China, which had affected India’s electric vehicle supply chains. To enhance self-reliance, the government has extended customs duty exemptions to capital goods used in manufacturing lithium-ion cells for battery energy storage systems, in addition to EV batteries. Sitharaman also announced exemptions on capital goods required for domestic processing of critical minerals.The Finance Minister further proposed a push for biogas-blended CNG, stating, “I propose to exclude the entire value of biogas while calculating the Central Excise duty payable on biogas-blended CNG.” In addition, new dedicated freight corridors are planned, including a route connecting Dankuni in the East to Surat in the West.

Overall, Budget 2026 outlined support for key sectors such as semiconductors, aviation, infrastructure, electronics, tourism and data centres, alongside measures aimed at promoting sustainable mobility.