India’s Critical Minerals Push: Cabinet Clears Rs 1,500-Crore Incentive Scheme In Push For Rare Earth, Critical Minerals

Rare Earth Materials: India’s Strategic Path to Self-Reliance

The Hidden Elements Powering the Green Transition

Imagine a future where your EV motor draws strength from magnets made with domestically recovered materials, where wind turbines, consumer electronics, and medical devices rely less on fragile overseas supply chains. That future depends on rare earth and other critical minerals — materials that rarely make the headlines but are foundational to modern technology and the green transition.

Why Rare Earths are Back in the Spotlight

Six months ago, rare earth elements (REEs) were largely overlooked. Today, they are central to global strategy discussions. The reasons are urgent and structural:

• Geopolitical Risk: Nearly 85–90% of rare earth processing passes through China, making nations vulnerable to export restrictions and supply shocks. India is diversifying sources to reduce this exposure.

• Rising EV Demand: EV motors rely on permanent magnets containing neodymium, praseodymium, and dysprosium. With global EV sales projected to grow more than fivefold by 2030, demand for rare earths is soaring.

• Defense Applications: Rare earths are embedded in jet engines, guided munitions, radars, and satellites. Securing supply is now a matter of strategic sovereignty for India.

Investor takeaway: Rare earths now sit at the intersection of clean energy, mobility, and national security, drawing focused policy, capital, and corporate attention.

EV Boom: The Demand Trigger for Rare Earths

Electric vehicles are compounding at over 30% year-on-year, creating a seismic shift in demand for high-power permanent magnets made with NdPr alloys. Each EV motor increases rare earth consumption directly, while China’s tight control over production amplifies supply risks.

Investor insight: Companies positioned at key nodes in the EV supply chain — magnet production, recycling, and material processing — could see disproportionate value creation as demand outpaces supply.

China’s Strategic Clampdown: A Global Shockwave

In April 2025, China banned exports of seven rare earth elements and restricted rare earth magnets (REMs). While justified as a national security measure, this move disrupted global supply chains across automotive, aerospace, consumer electronics, and defense industries.

Investor takeaway: This clampdown accelerates the global rush for alternative sources, highlighting the strategic urgency of domestic production and recycling in India.

China’s Dominance: The Supply Chain Chokehold

China accounts for over 60% of global REE mining and controls more than 85% of processing capacity, giving it leverage over high-value materials. Any policy change or geopolitical tension could send shockwaves across industries, emphasizing the need for diversified supply chains.

Lessons from Gallium and Germanium

Past export restrictions on gallium and germanium in 2023 demonstrated the fragility of concentrated supply chains. Prices surged, and industries from semiconductors to communications were impacted. REEs face a similar risk, making domestic diversification a strategic imperative.

Global Response: Diversifying Supply Chains

The US, EU, Japan, Australia, and India are investing heavily in exploration, refining, and partnerships with resource-rich nations. Rare earths are no longer just a commodity; they are the building blocks of industrial resilience, defense, and clean energy technologies.

Building Self-Reliance: Refining and Recycling

Efforts are underway to develop domestic refining and recycling capacity. Urban mining, battery recycling, and advanced refining technologies are being prioritized to reduce reliance on imports and strengthen India’s strategic sovereignty over critical minerals.

Impact on India: The Pressure is Rising

India’s dependence on imported REEs is a growing concern, particularly for EV motors and permanent magnets. Rising import costs and potential supply disruptions threaten the green mobility revolution.

Investor takeaway: Accelerating domestic exploration, processing, and recycling is critical to shield Indian industries from future shocks.

The Stakes for India’s Industrial Backbone

OEMs and high-tech manufacturers face production disruptions, project delays, and supply bottlenecks. Rare earths are embedded in EVs, defense systems, renewable energy, and electronics, making supply security a strategic imperative for India’s industrial ambitions.

India’s Rare Earth Paradox: Reserves vs. Reality

• Reserves: 5th largest globally (~6.9 million metric tonnes).

• Production: Only ~2,900 tonnes annually (~1% of global output).

• Downstream Ecosystem: Severely underdeveloped, forcing import dependence.

Investor insight: India is a sleeping giant; unlocking downstream capabilities is the key to realizing strategic value.

Untapped Potential: Andhra Pradesh Discovery

Recent surveys identified over 5.9 million tonnes of inferred rare earth resources in Andhra Pradesh. However, without processing, refining, and magnet manufacturing, India risks remaining an exporter of raw resources, missing out on strategic value.

Heavy Import Dependence: A Strategic Vulnerability

India imported 53,748 metric tonnes of rare earth magnets in FY25, with over 90% sourced from China. This exposes the country to external shocks, pricing pressures, and geopolitical risk, underscoring the urgency of domestic capacity building.

Import Dependence: The China Challenge

India imports nearly 870 tonnes of rare earth magnets annually (~₹306 crore), crucial for EVs, renewable energy, defense, and electronics. Without local processing, India remains vulnerable in one of the most critical supply chains of the 21st century.

Challenges in Processing and Value Addition

Most Indian reserves are in monazite sands, containing thorium, making processing complex and capital-intensive. Lack of refining and downstream manufacturing keeps India tethered to imports, preventing it from participating in high-value global supply chains.

Extraction Complexities and Limited Value Addition

Radioactive elements and environmental regulations add further hurdles. Despite large reserves, India remains largely a supplier of raw potential, highlighting a structural bottleneck in domestic rare earth ambitions.

Rare Earth Elements, their primary uses, deposits, and Producers:

Auto Sector Drives 3-Pronged Strategy to Reduce China Dependence on Rare Earth Magnets

1. Local Assembly & Production: Promote domestic magnet manufacturing and integrate local materials.

2. Recycling Initiatives: Recover magnets from end-of-life EVs and industrial equipment.

3. Global Sourcing Diversification: Partner with countries like Australia, Vietnam, and Peru to reduce import reliance.

Investor takeaway: Companies involved in domestic magnet production, recycling, and raw material processing are poised to benefit from this structural shift.

Government Initiatives Strengthen India’s Rare-Earth Strategy

• National Critical Mineral Mission (NCMM): Develop processing capabilities, strategic reserves, and recycling infrastructure.

• Global Partnerships & MOUs: Secure long-term supply from resource-rich nations to reduce import dependence.

Investor insight: Policy support creates structural advantages for domestic recyclers, processors, and manufacturers.

₹1,500 Crore Incentive Scheme: A Structural Boost for Rare-Earth Recycling

• 270 KTPA recycling capacity for lithium, cobalt, nickel, and REEs.

• 40 KTPA high-purity production, reducing import dependence.

Investor takeaway: Early movers in recycling, battery-making, and metal processing could capture long-term strategic feedstock advantages.

Distribution of Rare Earths production worldwide as of 2024, by country:

Companies Positioned to Benefit from India’s Rare-Earth & Mining Push

As India accelerates domestic mining, processing, and recycling of critical minerals, several companies are strategically positioned to capitalize on this growth. These firms span mining, metal processing, and downstream manufacturing, forming the backbone of India’s self-reliance in critical minerals:

• Tega Industries Ltd – Engineering solutions and wear-resistant components for mineral processing.

• Gujarat Mineral Development Corporation Ltd (GMDC) – Diversified mineral production and beneficiation.

• BEML Ltd – Mining equipment and heavy machinery supporting large-scale mineral projects.

• Vedanta Ltd – Integrated metals and mining company with a focus on base and strategic metals.

• AIA Engineering Ltd – High-chrome mill liners and wear-resistant solutions for mineral processing.

• MOIL Ltd – Manganese ore mining with downstream metallurgical applications.

• National Aluminium Company Ltd (NALCO) – Aluminium and associated critical metal production.

• Sandur Manganese & Iron Ores Ltd – Iron and manganese mining and beneficiation.

• Hindustan Copper Ltd – Domestic copper production and supply chain integration.

• Coal India Ltd – Coal production supporting energy and metallurgical needs.

• NMDC Ltd – Iron ore and strategic metal extraction, supporting infrastructure and industrial demand.

• Permanent Magnets Ltd – Focused on rare-earth magnets and high-tech applications for EVs and electronics.

Disclaimer: This content is for educational purposes only and should not be considered investment advice. Investors should conduct their own research before making decisions.