Budget 2026: Dedicated corridors to support mining, processing of rare earths

The Chinese hegemony in rare earth supplies is being addressed at scale by India. After launching a National Critical Mineral Mission with ₹16,300 crore outlay to galvanise production of minerals which are critical components for the automotive industry, Finance Minister Nirmala Sitharaman today announced a plan to create dedicated rare earth corridors and support states rich in these minerals. These corridors will assist Odisha, Kerala, Andhra Pradesh and Tamil Nadu in mining, processing, research and manufacturing of rare earths.

Sitharaman’s announcement during her Budget speech this morning comes on the heels of the Economic Survey terming rare earths as “primary currency of national security, energy transition and global negotiations”.

While specific details about the corridors will be available later, there is no ambiguity that rare earth metals and critical minerals – lithium, cobalt, nickel and copper – are becoming tougher to secure for India in an increasingly hostile global world order.

Chief Economic Advisor V Ananth Nageswaran called them strategic chokepoints while pointing out that for the structural transformation of India’s automotive and electronics industries, securing these minerals is a “non-negotiable strategic core” for long-term resilience. So, building domestic capacities for these metals and minerals is critical for India to avoid the trap of becoming a “client state” in a bifurcated technology landscape.

Already, there is a looming global shortage of copper, for example, driven by the dual pressures of the renewable energy transition and the Artificial Intelligence boom. The proliferation of AI data centres is consuming vast amounts of power and hardware, pushing copper demand to a point where global supplies may soon run short. Consequently, copper prices reached historic highs in 2025.Rajinsh Gupta, Partner, Tax and Economic Policy Group, EY India, said India has significant resources of rare earths and the creation of corridors “will bring them to production in a shorter time frame. A coordinated national framework can crowd in private investment, enable faster clearances and link mining with downstream applications such as EVs, electronics and defence. Such corridors can also reduce India’s import dependence over time and position the country as a trusted alternative supplier in global critical mineral value chains.” In the National Critical Mineral Mission launched late last year, key pillars are domestic exploration, foreign acquisitions, recycling incentives and legal reforms. The Geological Survey of India has taken up 230 exploration projects for strategic minerals in FY26. And through Khanij Bidesh India Ltd (KABIL), India has acquired over 15,000 hectares for lithium mining in Argentina and formed partnerships in Australia and Chile.

Then, a ₹1,500 crore scheme has been approved to promote the recycling of critical minerals from end-of-life products to reduce primary import dependence. Also, the MMDR Act was amended in 2025 to allow the inclusion of new minerals in mining leases and open the sector to more private participation.

Then, according to some reports, a two-month national stockpiling of rare earth elements as abuffer against global supply shocks is also being considered.

Saket Mehra, Partner, Grant Thornton Bharat, said today’ s announcement about creation of corridors for rare earths reinforces the government’s vision to reduce import dependency for manufacturing components critical to the EV ecosystem. “This development will accelerate the rollout of the ₹7,280‑crore scheme announced in 2025, which aims to expand India’s capabilities from mining to the entire value‑chain system, strengthening domestic manufacturing and enabling end‑to‑end value creation.”

Industry innovates amid shortage:
Most vehicle manufacturers have either found a way around the shortage or lowered production in the hope of easing supplies in the near future. The shortage has primarily arisen due to China’s restrictions on exports of rare earth magnets – China accounts for more than two-thirds of the global supplies of such metals and magnets – and the restrictions have not been lifted so far.

OEMs have shifted to alternative motor designs that do not use heavy rare earth magnets, many pilots are being done for induction motors and ferrite based magnet motors and some OEMs have also forged partnerships to make rare-earth free motors. Also, many OEMs have begun managing buffer inventories of such magnets besides looking for alternative global sources.