Budget 2026: Govt plans rare earth corridors to counter constrained global supply chains

This first-of-its-kind initiative aims to establish 6,000 metric tonnes per annum of integrated rare earth permanent magnet manufacturing.

Union finance minister Nirmala Sitharaman on Sunday proposed establishing dedicated rare earth corridors in Odisha, Kerala, Andhra Pradesh and Tamil Nadu to counter constrained global supply chains. The move was part of a suite of customs duty exemptions aimed at strengthening India’s critical minerals and clean energy infrastructure.

The mineral-rich states will receive support to promote mining, processing, research and manufacturing of rare earths. (Reuters/Representational Image)

The mineral-rich states will receive support to promote mining, processing, research and manufacturing of rare earths. Simultaneously, the government will exempt customs duties on capital goods required for processing critical minerals and various renewable and nuclear energy materials.

“I propose to extend the basic customs duty exemption given to capital goods used for manufacturing lithium-ion cells for batteries, to those used for manufacturing lithium-ion cells for battery energy storage systems too,” Sitharaman said in her budget speech.

The announcement builds on the November 2025 cabinet approval of the Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets. This first-of-its-kind initiative has a financial outlay of ₹7,280 crore and aims to establish 6,000 metric tonnes per annum of integrated rare earth permanent magnet manufacturing to enhance self-reliance.

Sitharaman framed the measures against an external environment “in which trade and multilateralism are imperilled and access to resources and supply chains are disrupted.” She added that new technologies are “transforming production systems while sharply increasing demands on water, energy and critical minerals.”

Rishabh Jain, fellow at the Council on Energy, Environment and Water (CEEW), said the rare earth corridors mark “a pivotal shift from national policies and regulatory reforms to state-level execution via local value add,” building on the National Critical Minerals Mission and recent magnet scheme by grounding them in coastal states.

“By anchoring supply chains in mineral-rich states we are finally bridging the critical gap between upstream mining and downstream manufacturing,” Jain said. He noted CEEW analysis highlights mineral processing as a key missing link but cautioned the government must follow up with robust offtake guarantees and technology transfer from international partners for complex sintering processes.

Duttatreya Das, energy analyst at Ember, said whilst the budget delivered no big-ticket announcements for renewables, “continued duty exemptions, support for critical minerals, and manufacturing reforms are expected to quietly strengthen clean energy supply chains.”

“To promote decarbonization, a provision of ₹20,000 crore has been made over the next five years to encourage Carbon Capture, Utilization, and Storage (CCUS) technologies reflecting India’s commitment towards fulfilment of the obligations under Paris Agreement of reducing GHG emissions. The National Manufacturing Mission has been expanded to focus on developing a domestic ecosystem for EV batteries - a major step towards green mobility, solar PV cells, electrolyzers, and wind turbines. Over the next five years, 20 new national waterways will be made operational, helping to reduce the carbon footprint of logistics - again a major step towards eco-friendly transport,” said Bhupender Yadav, union environment minister.