Budget 2026's Push for Rare Earth Corridors and REPM Manufacturing Scheme
In a significant move aimed at reducing import dependency and enhancing self-reliance in critical minerals, Union Finance Minister Nirmala Sitharaman, during her Budget 2026-27 speech, proposed the establishment of dedicated rare earth corridors in India's coastal states. This proposal aligns with the recently announced 'Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets (REPM)', marking a strategic step towards securing India's position in the global supply chain for these vital components.
What Are Sintered Rare Earth Permanent Magnets (REPM)?
Sintered Rare Earth Permanent Magnets, primarily composed of neodymium, iron, and boron (NdFeB), represent the strongest and most commercially demanded permanent magnets available today. These magnets utilize light rare-earth elements like neodymium (Nd) and praseodymium (Pr), combined with iron (Fe) and boron (B), to achieve exceptional magnetic properties. To enhance their resistance to demagnetization, especially under high-temperature conditions, heavy rare-earth elements such as dysprosium (Dy) and terbium (Tb) are incorporated.
The manufacturing process for REPMs is complex and involves multiple stages: mining, beneficiation, processing, extraction, refining to rare earth oxide, conversion of oxides to metal, metal to alloy, and finally magnet manufacturing. The new government scheme specifically targets support for integrated REPM manufacturing facilities capable of undertaking the final three critical stages: converting rare earth oxide to metal, metal to alloy, and alloy to REPM.
Key Features of the REPM Manufacturing Scheme
The 'Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets' is designed with ambitious targets and substantial financial incentives:
- The government aims to support an integrated REPM manufacturing capacity of 6,000 metric tonnes per annum (MTPA).
- This capacity will be allocated among five beneficiaries selected through a competitive bidding process, with each eligible for up to 1,200 MTPA.
- Selected beneficiaries will receive sales-linked incentives totaling Rs 6,450 crore over a five-year period.
- Additionally, a capital subsidy of Rs 750 crore will be provided to assist in setting up integrated REPM facilities.
Strategic Importance and Current Dependencies
High-strength REPMs are indispensable for a wide array of advanced technologies, including electric vehicles, renewable energy systems, electronics, aerospace, and defense applications. Despite their critical importance, global manufacturing of these magnets is highly concentrated, with China controlling over 90% of both the manufacturing and processing of raw materials required for production.
India's current dependence on China for these magnets is substantial. During the 2024-25 period, India imported more than 53,000 tonnes of rare earth magnets, with over 90% sourced from China. With domestic consumption of rare earth permanent magnets projected to double by 2030, the need for indigenous manufacturing capabilities has become increasingly urgent.
Proposed Rare Earth Corridors in Coastal States
The Finance Minister's proposal includes the development of dedicated rare earth corridors in the coastal states of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. These corridors are envisioned to create specialized infrastructure and ecosystems conducive to the entire value chain of rare earth processing and magnet manufacturing, potentially boosting regional economic development and technological advancement.
Broader Initiatives for Critical Mineral Security
The REPM scheme and rare earth corridor proposal are part of a larger strategic framework aimed at securing India's critical mineral supply chain:
- National Critical Mineral Mission (NCMM): Launched in January for a seven-year period from 2024-25 to 2030-31, with a proposed outlay of Rs 16,300 crore. This mission aims to ensure reliable access to key minerals domestically and internationally while strengthening the entire value chain through improved technology, regulation, and financing for exploration, mining, processing, and recycling.
- Khanij Bidesh India Limited (KABIL): A Joint Venture company established for exploring critical mineral assets in foreign countries. KABIL has already signed an Exploration and Development Agreement with Camyen, a state-owned enterprise in Argentina's Catamarca province, for the exploration and mining of five Lithium Brine Blocks.
- Critical Minerals Identification and Auction: In 2023, India identified 30 minerals as "critical." The same year, amendments to the Mines and Minerals (Development and Regulation) Act, 1957 empowered the central government to exclusively auction critical and strategic minerals like lithium, cobalt, and rare earth elements. Since then, 34 critical mineral blocks have been auctioned in the country.
Understanding Rare Earth Elements
Rare Earth Elements (REEs) comprise a set of 17 chemical elements in the periodic table—the 15 lanthanides, plus scandium and yttrium. These elements are typically found together in ore deposits and share similar chemical properties. REEs are categorized as light rare earth elements (LREE) and heavy rare earth elements (HREE).
While India possesses deposits of certain LREEs like Lanthanum, Cerium, Neodymium, Praseodymium, and Samarium, it lacks extractable quantities of critical HREEs such as Dysprosium, Terbium, and Europium. This scarcity contributes to the dependence on countries like China, which holds an estimated 70% share of global rare earth production.
The Union Budget 2026-27's focus on rare earth corridors and the REPM manufacturing scheme represents a concerted effort to address these vulnerabilities, foster domestic capabilities, and position India as a significant player in the global market for critical minerals and advanced technological components.
