India plans to offer grants, ease regulatory norms for rare earth processing amid China supply woes
New Delhi: India plans to introduce a range of measures including the provision of grants to private companies to boost the processing of rare earth elements as the country copes with supply constraints from China, two people with knowledge of the development said.
The measures include grants—or viability gap funding (VGF)—easing of the regulatory framework and fast-tracking auctions of rare-earth mines and acquisitions to counter the curbs imposed by China on sales of rare earth magnets and minerals, they said.
"The government aims to achieve a 10% share of global rare earth processing within the country in the coming years. VGF, incentives for refining and regulatory easing are part of the broader strategy to achieve that target," one person said.
The Indian government and industry are exploring ways to reduce reliance on China for these elements that go into several electronic components, particularly motors that drive electric vehicles. China imposed restrictions on its global export of rare earth minerals and magnets in April amid the trade and tariff war between the US and other nations.
VGF provides financial support to infrastructure projects developed under public-private partnerships that may not be commercially viable. As much as 40% of the total project cost is provided—a maximum of 20% each by the Central and state government.
The amount to be provided as grants for rare earth processing is being assessed, the people said.
Companies that could benefit from these grants include NMDC, Coal India, Gujarat Mineral Development Corporation, Orissa Minerals Development Company, Hindustan Zinc, Vedanta and MOIL, formerly Manganese Ore (India), an industry executive said on condition of anonymity.
Also Read | Automakers urge Indian govt for diplomatic outreach to China for rare earths
Another person said that policy measures for rare earth elements (REE) would be taken under the Nation Critical Mineral Mission that the Union Cabinet approved in January. However, given the urgency of the situation, measures beyond the targets of the mission may be taken up.
The government is already working on an incentive scheme for recycling critical minerals including rare earth elements, with an estimated allocation of ₹1,500 crore. According to the mines ministry, this is in the final stages of approval, after which it will go to the Union Cabinet.
Pivotal role
Rare earths are a collection of 17 elements—scandium, yttrium and 15 lanthanides, which are: lanthanum (La), cerium (Ce), praseodymium (Pr), neodymium (Nd), promethium (Pm), samarium (Sm), europium (Eu), gadolinium (Gd), terbium (Tb), dysprosium (Dy), holmium (Ho), erbium (Er), thulium (Tm), ytterbium (Yb) and lutetium (Lu).
India imports most of its rare earth requirements. Imports rose 16.7% to 2,270 tonnes in FY24. These elements play a pivotal role in hi-tech industries, automobiles, renewable energy transition, defence systems as well as the electronics sector.
'India's imports of permanent magnets—many containing rare earth elements—nearly doubled to 53,700 tonnes in FY25 from around 28,700 tonnes the year before, according to official trade data. There is no domestic magnet production. India relies on imported magnets, mainly from China," said Rajib Maitra, a partner at Deloitte India.
Considering the importance of these elements, India has categorised rare earth elements (not containing uranium and thorium) as critical/strategic minerals. This allows the Centre to auction exploration licences and composite licences to mine these minerals in the country. Previously, mining of these critical and atomic minerals was reserved only for state agencies under the Department of Atomic Energy.
Also Read | India's top rare-earths producer IREL is headless amid mounting supply risks from China
As per the US Geological Survey, India has the third-largest reserves of rare earth elements, at about 6.9 million tonnes, after China (44 million tonnes) and Brazil (21 million tonnes). However, there is no significant production of rare earths in India because of the lack of exploration, mining and processing facilities. China accounted for 70% of the global production in 2024, according to the USGS.
"Considering the huge reserves of REEs in the country, it has immense potential to raise mining of REEs," said BK Bhatia, director-general of the Federation of Indian Minerals Industries.
Currently, IREL (India) Ltd (formerly Indian Rare Earths Ltd), a company under the Department of Atomic Energy, is the only agency involved in production of rare earths from beach sand minerals. The mining of beach sand minerals was earlier prohibited for the private sector.
The other source of REEs are hard rocks. Earlier this year, the ministry of mines auctioned four blocks of REEs. However, of the four blocks, only one in Uttar Pradesh is exclusively for REE and the rest are largely associated with other critical minerals.
Mission mode
Industry stakeholders said it is imperative to have a facilitating regulatory regime to attract the private sector, including overseas companies, to explore, mine, extract and process rare earths because developing a deep-seated or critical mineral deposit from the stage of prospecting to mining takes a minimum of 8-10 years.
"Extraction and processing capabilities of REEs is a big challenge. There is a need to work on the same in mission mode by bringing synergy among R&D institutes, academia and industry for developing domestic processing technology on a commercial scale to achieve the ambitious target of 10% global REEs in the country," Bhatia said.
Processing, a key part of the rare earth supply chain, is again dominated by China with its technological advancements.
'Extracting rare earth elements is only one part of the value chain; processing them into usable materials is equally critical," said Rajnish Gupta, partner, tax and economic policy group, at EY India. 'While mining is becoming more diversified globally, processing remains concentrated in a few countries, creating supply chain vulnerabilities."
Also Read | China's rare earths aren't as rare as you think
Gupta noted that rare earth deposits have unique chemical compositions, requiring customised processing techniques and ongoing research. Further, extraction needs optimisation and the environmental impact needs to be addressed, while specialised equipment is required.
"India would need to gain access to specialised technology or develop it over time. Manpower and infrastructure issues also need to be addressed. Planning should start right away. All constraints must be examined, and production and processing need to be synchronised," Gupta said.
A domestic processing industry would also be key to process and refine minerals imported through the ventures of public sector Coal India Ltd and Khanij Bidesh India Ltd, which are scouting for critical minerals and rare earth mines abroad.
"We need to scale up processing capabilities for rare earth elements rapidly, for which technology is already available. The processing capabilities can be developed independent of domestic mining capacity since there was removal of import duties from critical minerals recently," said Maitra of Deloitte India.
Queries sent to the ministry of mines remained unanswered until publishing time.
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