India Pours Over $10 Billion Into Rare Earths to Cut China Dependence

India’s Finance Ministry has unveiled a budget proposal for the current financial year that will boost domestic rare earths mining and the clean energy sector as part of a broader effort to break global supply chain monopolies--particularly China’s dominance--and achieve strategic self-reliance in critical minerals.In the Union Budget 2026-27 presented over the weekend, Finance Minister Nirmala Sitharaman unveiled a strategic initiative to establish dedicated rare earth corridors across four mineral-rich coastal states of Odisha, Kerala, Andhra Pradesh and Tamil Nadu. These corridors will act as integrated zones connecting mines, processing units, research labs, and factories to streamline the movement and production of rare earth elements (REEs).The initiative builds on the ?7,280 crore scheme ($800 million) approved in late 2025 to promote the manufacturing of Sintered Rare Earth Permanent Magnets (REPM). This scheme targets an annual production capacity of 6,000 metric tonnes. India plans to leverage its substantial reserves (estimated at 8.52 million tonnes) of REEs found in monazite-rich beach sands along its coasts.The budget will also extend tax incentives, including full exemptions, for critical mineral processing. REEs are essential for high-tech industries including electric vehicles (EVs), wind turbines, semiconductors, defense electronics and smartphones. In Kerala alone, the corridor is expected to attract ?42,000 crore ($4.6 billion) in investments and generate approximately 50,000 jobs. The REPM scheme spans seven years, including a two-year gestation period for setting up facilities and five years for sales-linked incentives. Up to five beneficiaries will be selected through a global competitive bidding process to ensure high-tech standards and competitiveness.“By identifying, exploring, and processing rare earth minerals domestically, India aims to reduce its dependence on external sources,” Civil Aviation Minister Ram Mohan Naidu said.Beyond minerals, the Indian government has announced a massive, multi-pronged push to develop the renewable energy sector, with total allocations and targeted investments exceeding ?87,000 crore ($9.6 billion) across different initiatives, including power generation and nuclear energy.The Ministry of New & Renewable Energy (MNRE) budgetary allocation was ?32,914.7 crore ($3.7 billion) representing a nearly 30% increase from the revised estimates of the previous year.PM Surya Ghar: Muft Bijli Yojana received an allocation of ?22,000 crore ($2.4 billion) to accelerate household residential solar adoption while PM-KUSUM (Agri-Solar) was raised to ?5,000 crore ($550 million). PM Surya Ghar: Muft Bijli Yojana is a flagship scheme launched by the Government of India on February 13, 2024, designed to provide up to 300 units of free electricity every month to 10 million households.The scheme encourages the installation of rooftop solar (RTS) systems in the residential sector. The project has a total financial outlay of Rs. 75,021 crore ($8.2 billion), and aims to reduce carbon emissions by 720 million tonnes over 25 years. Meanwhile, India's PM-KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan) is a central government scheme launched in 2019 to promote solar energy in agriculture. It provides up to 60% subsidies for farmers to install solar pumps, solarize existing grid-connected pumps, and set up solar power plants on barren land, aims to enhance income, reduce diesel usage and ensure energy security.The budget has also proposed a new dedicated plan for Carbon Capture, Utilisation, and Storage (CCUS), with ?20,000 crore ($2.2 billion) proposed over the next five years to support industrial decarbonization in sectors like power, steel and cement, supporting the country's net-zero 2070 goal. Further, the Union Budget 2026-27 reinforces a major push for nuclear energy as a clean baseload power source, aiming for 100 GW of nuclear capacity by 2047. Key highlights include a ?24,124 crore ($2.7 billion) allocation for the Department of Atomic Energy; an allocation for R&D projects at the Bhabha Atomic Research Centre (BARC) was nearly doubled to ?1,800 crore ($198 million) as well as significant tax concessions to boost infrastructure.The budget supports the Nuclear Energy Mission, focused on the research and development (R&D) of Small Modular Reactors (SMRs) and "Bharat Small Reactors" (BSRs), with a target to operationalize at least five indigenously developed SMRs by 2033. The existing basic customs duty (BCD) exemption on imports of goods required for nuclear power projects has been extended until 2035. This exemption was expanded to cover all nuclear power plants, regardless of their capacity, to encourage faster development. As part of the strategy, the government is also exploring the use of retired coal plant sites for new nuclear reactors.The Indian government intends to use these measures to increase nuclear capacity to 22 GW by 2032, 47 GW by 2037, 67 GW by 2042, and finally 100 GW by 2047. India and Russia maintain a strategic civil nuclear partnership centered on the Kudankulam Nuclear Power Plant (KKNPP) in Tamil Nadu, where Russia is building six 1000 MW reactors and supplying required nuclear fuel. With units 1 and 2 operational, Russia remains India’s primary supplier of nuclear fuel.By Alex Kimani for Oilprice.com