Budget 2026: India Plans Rare Earth Corridors In Tamil Nadu, Kerala, Other States To Cut China Dependence

Seeking to reduce India’s dependence on China for critical minerals, Union Finance Minister Nirmala Sitharaman on February 1 announced the establishment of dedicated rare earth corridors across four states, Tamil Nadu, Kerala, Odisha and Andhra Pradesh.

Unveiling the proposal in her Union Budget 2026-27 speech, Sitharaman said the initiative builds on the rare earth permanent magnet scheme launched in November 2025. “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,” she said.

Rare earth elements, a group of 17 minerals, are essential to a range of high-value and strategic industries, including consumer electronics, electric vehicles, renewable energy systems and defence manufacturing. At present, China dominates the global supply chain, accounting for about 60 percent of worldwide rare earth mining and nearly 90 percent of refined production and permanent magnet output.

The concentration of production has raised concerns globally over supply security, particularly amid periodic export controls imposed by Beijing, prompting countries such as India to accelerate efforts to develop domestic capabilities across the rare earth value chain.

Beyond strengthening domestic supply chains, the announcement also carries political significance. Tamil Nadu and Kerala, two of the states identified for the corridors, are scheduled to go to the polls later this year, giving the budget proposal added regional relevance.

Industry experts highlighted that the planned corridors could help in manufacturing components for several sectors like EV, defence and others.

Divyam Mour, Research Analyst, SAMCO Securities, said: “The government’s push to develop rare earth corridors across Odisha, Kerala, Andhra Pradesh, and Tamil Nadu marks a strategic move to secure India’s critical mineral supply chain and reduce reliance on China, particularly for rare earth magnets used in electronics, EVs, and defence applications.”

Amit Bhargava, Partner and National Leader, Metals and Mining, KPMG in India, said: “Union Budget 2026 has stayed true to that stated national path and specifically for metals and mining has further sharpened the focus on critical and rare earth minerals, increased logistics competitiveness and bolstered demand impetus.”

Bhargava also said that establishing rare earth corridors in Andhra Pradesh, Orissa, Kerala and Tamil Nadu would also effectively help in setting up permanent rare earth magnets manufacturing.

India’s Rare Earth Deposits

As per a PIB release, India has a substantial base of rare-earth minerals, particularly monazite deposits located across several coastal and inland regions. These deposits contain about 13.15 million tonnes of monazite, holding an estimated 7.23 million tonnes of rare-earth oxides (REO), and occur in coastal beach sands, teri/red sands and inland alluvium in Andhra Pradesh, Odisha, Tamil Nadu, Kerala, West Bengal, Jharkhand, Gujarat and Maharashtra. These oxides serve as the primary raw material for downstream rare-earth industries, including permanent magnet manufacturing.

In addition, 1.29 million tonnes of in-situ REO resources have been identified in hard-rock areas of Gujarat and Rajasthan, while the Geological Survey of India has further augmented 482.6 million tonnes of rare-earth ore resources through extensive exploration initiatives. Together, these assessments demonstrate the availability of substantial raw material resources to support downstream rare-earth–based industries, including REPM manufacturing.

The release also showed that India sourced a major share of its permanent magnet imports from China during 2022-23 to 2024-25, with import dependence ranging between 59.6 percent and 81.3 percent value-wise and 84.8 percent and 90.4 percent quantity-wise.

Previous Schemes

The government in November-December 2025 approved the ‘Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnet’ with a financial outlay of Rs 7,280 crore. The scheme aims to establish 6,000 metric tonnes per annum (MTPA) of integrated REPM manufacturing capacity in India, covering the full chain from rare-earth oxides to finished magnets.

By building a domestic integrated ecosystem, the initiative is intended to enhance self-reliance in a critical input for electric vehicles, renewable energy systems, electronics, aerospace and defence, and to position India as a key player in the global REPM market. It also supports broader national objectives, including Atmanirbhar Bharat, resilient supply chains for strategic sectors, and the country’s long-term Net Zero 2070 vision.