Union Budget 2026 backs rare earth corridors, CCUS push to secure supply chains

The proposed corridors will focus on mining, processing, research and manufacturing of rare earth elements.

Union finance minister Nirmala Sitharaman on Sunday proposed supporting mineral-rich states such as Odisha, Kerala, Andhra Pradesh and Tamil Nadu to establish dedicated rare earth corridors as India looks to counter constrained global supply chains of criticaRl minerals.

Sitaraman proposed rare earth coridor

The proposed corridors will focus on mining, processing, research and manufacturing of rare earth elements, which are vital for clean energy technologies, electronics and defence applications. A scheme for rare earth permanent magnets was launched in November 2025.

Sitharaman said India is operating in a challenging global environment. “Today, we face an external environment in which trade and multilateralism are imperilled and access to resources and supply chains are disrupted. New technologies are transforming production systems while sharply increasing demands on water, energy and critical minerals,” she said.

HT had reported on October 1 last year that after a decision to fast-track environmental and forest clearance processes for critical minerals, all mining projects involving atomic minerals and critical and strategic minerals notified in the first schedule (Part B and D) of the Mines and Minerals (Development and Regulation) Act would be exempt from public hearings, according to the Union environment ministry.

“The announcement on ‘Rare Earth Corridors’ marks a pivotal shift from national policies and regulatory reforms to state-level execution via local value addition. It builds on the National Critical Minerals Mission and the recent Magnet Manufacturing Scheme by grounding them in the coastal states,” said Rishabh Jain, fellow at the Council on Energy, Environment and Water (CEEW).

“By anchoring supply chains in mineral-rich states, we are finally bridging the critical gap between upstream mining and downstream manufacturing. Leveraging existing initiatives such as Critical Minerals Processing Parks, the stockpiling policy and the Centre of Excellence under NCMM can accelerate the rollout,” Jain said, adding that CEEW’s analysis shows mineral processing remains a key missing link in the critical minerals supply chain.

“However, to ensure these corridors succeed, the government must follow up with robust offtake guarantees to secure domestic demand, strengthen research and development, and facilitate technology transfer from international partners for complex sintering processes, by leveraging partnerships with countries such as Japan, the UK and the EU,” he said.

Sitharaman also proposed measures to promote environmentally sustainable movement of cargo. She announced plans to establish new Dedicated Freight Corridors connecting Dankuni in the East to Surat in the West, and to operationalise 20 new National Waterways over the next five years.

These will begin with National Waterway-5 in Odisha, aimed at connecting mineral-rich areas of Talcher and Angul and industrial hubs such as Kalinga Nagar to the ports of Paradeep and Dhamra.

To address the rise in carbon emissions associated with increased manufacturing, Sitharaman announced large-scale implementation of Carbon Capture, Utilisation and Storage (CCUS).

“Aligning with the roadmap launched in December 2025, CCUS technologies at scale will achieve higher readiness levels in end-use applications across five industrial sectors, including power, steel, cement, refineries and chemicals. An outlay of ₹20,000 crore is proposed over the next five years,” she said.

Commenting on the budget, Abinash Mohanty, global sector head of climate change and sustainability at IPE Global, said the Union Budget 2026 lacked a strong focus on climate adaptation. “Climate-related economic losses are estimated at over 3% of GDP annually, and more than 80% of India’s population is exposed to escalating climate risks, yet there is no clear, scaled-up fiscal roadmap for adaptation-critical priorities such as heat action planning, flood-resilient infrastructure, water security or climate-resilient agriculture,” he said.

However, Mohanty said the budget showed continuity in India’s energy transition. “The ₹20,000 crore commitment for CCUS, continued support for the National Green Hydrogen Mission, and new financial mechanisms for battery energy storage systems and pumped storage signal a pragmatic approach to decarbonising hard-to-abate sectors,” he said.

He added that with India adding 34.56 GW of non-fossil fuel capacity in the past year, taking total installed non-fossil capacity beyond 200 GW, the emphasis on grid modernisation and inter-state transmission infrastructure was timely and essential.

The Budget also proposed several customs duty exemptions, wherein basic customs duty on monazite, a critical mineral, has been reduced from 2.5% to nil. Duty on sodium antimonate used in solar glass manufacturing has been cut from 7.5% to nil. Customs duty on all goods used for nuclear power generation has been reduced from 7.5% to nil. Goods required for setting up specified nuclear power projects, irrespective of capacity, will also be exempt if the projects are registered with customs authorities on or before September 30, 2035.

“The Union Budget 2026–27 clearly positions manufacturing at the heart of India’s energy transition,” said Chetan Shah, chairman and managing director of Solex Energy Limited. “By extending customs duty exemptions for batteries, energy storage systems, critical mineral processing and nuclear infrastructure, the government has provided long-term policy certainty that will accelerate domestic value addition and global-scale manufacturing in India.”