Rare Earth Corridors in Budget 2026–27: How India’s Strategic Minerals Push Will Transform Andhra Pradesh and Counter China’s Dominance
- Aditya
- 17 hours ago
- 7 min read
In a landmark policy announcement with deep economic, industrial, and geopolitical implications, Union Finance Minister Nirmala Sitharaman announced the creation of dedicated Rare Earth Corridors (RECs) across four mineral-rich Indian States — Odisha, Kerala, Andhra Pradesh, and Tamil Nadu — during her Union Budget 2026–27 speech in Parliament on Sunday, February 1, 2026.
Presenting her ninth consecutive Union Budget for the financial year April 2026 to March 2027, Sitharaman said the government would support these States in establishing corridors to promote mining, processing, research, and manufacturing of rare earth minerals, as India seeks to secure supplies of materials that are increasingly viewed as the backbone of 21st-century industrial power.
This announcement did not come in isolation. Instead, it builds on a series of policy decisions taken in late 2025, aligns with broader manufacturing and technology initiatives outlined in the Budget, and reflects the global scramble to reduce dependence on a supply chain overwhelmingly dominated by China.
What Are Rare Earth Corridors — And What Problem Are They Meant to Solve?
The proposed Rare Earth Corridors are not merely transport routes. They represent a planning and industrial framework designed to connect:
Rare earth mineral extraction sites
Processing and refining plants
Research and development institutions
Manufacturing clusters producing high-value components such as rare earth permanent magnets
By creating this integrated structure, the government aims to streamline logistics, reduce delays, attract private investment, and ensure that domestic production becomes cost-competitive and technologically viable.
As Sitharaman told the Lok Sabha:
“A scheme for rare earth permanent magnets was launched in 2025. We now propose to support the mineral-rich States of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu in establishing dedicated rare-earth corridors to promote mining, processing, research and manufacturing.”
Why These Four States Were Chosen
The selection of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu is rooted in geology, infrastructure, and industrial readiness.
All four States:
Are recognised for their mineral wealth, particularly in coastal and mineral belt regions
Possess known rare earth deposits, often in monazite-bearing sands
Have ports, industrial zones, and logistics infrastructure that can support large-scale processing and manufacturing
Two of the four States — Tamil Nadu and Kerala — are also scheduled to go to Assembly elections later in 2026, adding a political dimension to the announcement.
Why Andhra Pradesh Stands to Gain Significantly
Among the four States, Andhra Pradesh emerges as a particularly important beneficiary.
Rare Earth Reserves and Early Exploration
The Ministry of Mines has identified significant reserves of rare earth elements in Andhra Pradesh. In 2024, the Geological Survey of India (GSI) handed over certain rare earth blocks to the State government for auction, enabling exploration and future mining activity.
As one of India’s four mineral-rich States, Andhra Pradesh is now positioned to move beyond raw mineral extraction and into higher-value activities such as processing, research, and manufacturing.
High Speed Rail Corridors Bring Additional Investment to Andhra
The Budget also announced two High Speed Rail Corridors (HSRCs) that will indirectly boost Andhra Pradesh through infrastructure-led investment:
Hyderabad–Bengaluru High Speed Rail Corridor
Hyderabad–Chennai High Speed Rail Corridor
Major Andhra Pradesh Stations on These Corridors
Kurnool, Dhone, Guntakal, Anantapur, Dharmavaram, Hindupur, Tadipatri, Yerraguntla, Kadapa, Rajampet, and Renigunta.
These corridors are expected to unlock:
New capital investment
Improved connectivity
Industrial and urban development along transit nodes
Tax Holiday Boost for Google’s Hyperscale Data Centre in Visakhapatnam
The Budget also brings major relief to critical digital infrastructure projects, including the hyperscale data centre proposed by Google in Visakhapatnam, to be set up through its subsidiary Raiden Infotech Limited.
Key Tax Incentive Announced
The Centre has offered:
A tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India, subject to the condition that services to Indian customers must be provided through an Indian reseller entity.
This move is aimed at positioning India as a global hub for cloud services and data infrastructure.
Urban Infrastructure Funding and New Financing Instruments
In addition, a majority of Andhra Pradesh’s cities with populations above five lakh will continue to receive funding under various initiatives for large-scale public infrastructure enhancement.
This will be supported through new financing mechanisms such as:
Infrastructure Investment Trusts (InvITs)
Real Estate Investment Trusts (REITs)
Institutions including NIIF and NABFID
Ecotourism Push: Pulikat Lake and Araku Valley
The Centre will also support:
Development of bird-watching trails along Pulikat Lake in Andhra Pradesh and Tamil Nadu
An ecological mountain trail in Araku Valley
These initiatives are aimed at boosting ecotourism, sustainable livelihoods, and conservation-led development.
₹7,280-Crore Rare Earth Permanent Magnet Scheme: The Backbone of the Corridor Plan
The Rare Earth Corridor proposal builds directly on the ₹7,280-crore incentive package approved by the Union Cabinet in November 2025 to promote domestic manufacturing of Rare Earth Permanent Magnets (REPMs).
Scheme Details (Fully Intact)
Target: 6,000 metric tonnes per annum (MTPA) of integrated REPM manufacturing capacity
₹6,450 crore allocated as sales-linked incentives over five years
₹750 crore allocated as capital subsidy for setting up manufacturing facilities
Support for five manufacturing plants
Coverage of the entire value chain, from rare earth oxides to finished magnets
India’s Rare Earth Potential — And Its Constraints
India holds one of the world’s largest rare earth deposits, estimated at 6.9 million tonnes.
However, rare earth magnet manufacturing is:
Energy-intensive
Environmentally challenging
Generates toxic waste
The value chain begins with mining rare earth oxides, followed by processing into alloys and then conversion into magnets.
China’s Dominance and the 2025 Supply Shock
China controls:
Over 60% of global rare earth production
Nearly 92% of global refining capacity
More than 90% of rare earth magnet supply
About 30% of global exports
In April 2025, China imposed export restrictions on rare earth magnets, triggering shortages in India’s automobile and electric vehicle sectors.
Although Beijing later announced a temporary pause on some restrictions through much of 2026, the episode exposed India’s vulnerability.
India’s Import Data Shows Rising Dependence
Rare earth imports increased from $14.1 million in 2014 to $17.5 million in 2024
Over 45% of these imports came from China
According to the International Energy Agency, rare earth elements comprise 17 metals, divided into:
Light Rare Earths (LREEs): lanthanum, cerium, praseodymium, neodymium, samarium, europium
Heavy Rare Earths (HREEs): gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, yttrium
Promethium is excluded as it is radioactive and not found in mineable quantities.
Role of IREL and Industry Reaction
State-run Indian Rare Earths Ltd (IREL) remains India’s sole producer of rare earth oxides and magnets and will supply 500 tonnes of rare earth oxides to manufacturers under the scheme.
Saket Mehra, Partner at Grant Thornton Bharat, noted that the initiative aligns with India’s goal of reducing import dependence for the EV ecosystem and enabling end-to-end domestic value creation.
Despite broader market weakness, mineral-focused PSU stocks reacted positively:
Gujarat Mineral Development Corporation: ~7% rise to ₹617.8
Orissa Minerals Development Company: ~7% rise to ~₹4,776
NMDC: ~2% gain after reversing early losses
What Comes Next in India’s Manufacturing Strategy
The rare earth corridor initiative sits within a wider industrial push outlined in Budget 2026–27, including:
₹40,000 crore for India Semiconductor Mission 2.0
₹40,000 crore for electronics components manufacturing
High-tech tool rooms by CPSEs as digitally enabled automation hubs
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A Structural Shift, Not a Symbolic Move
The creation of Rare Earth Corridors represents a structural shift in India’s industrial policy — from exporting raw materials to building integrated, high-value manufacturing ecosystems.
For Andhra Pradesh and other mineral-rich States, the initiative promises:
Strategic relevance
Industrial investment
Entry into global clean energy and defence supply chains
As rare earths increasingly define economic and strategic power, Budget 2026–27 signals India’s intent to become a serious player — not a passive importer.
Rare Earth Corridors: FAQs
Q. What are Rare Earth Corridors announced in Budget 2026–27?
Ans. Rare Earth Corridors are integrated industrial zones announced in Union Budget 2026–27 to promote the mining, processing, research, and manufacturing of rare earth elements. These corridors are designed to link mineral extraction sites with processing units, research institutions, and manufacturing clusters, especially for rare earth permanent magnets.
Q. Which states will get Rare Earth Corridors in India?
Ans. The government will establish Rare Earth Corridors in four mineral-rich states: Odisha, Kerala, Andhra Pradesh and Tamil Nadu.
Q. Who announced the Rare Earth Corridor initiative?
Ans. The initiative was announced by Nirmala Sitharaman during her Union Budget 2026–27 speech in Parliament on February 1, 2026, while presenting her ninth consecutive Union Budget.
Q. Why is Andhra Pradesh important for Rare Earth Corridors?
Ans. Andhra Pradesh has significant rare earth reserves, identified by the Ministry of Mines. In 2024, the Geological Survey of India allocated rare earth blocks to the State government for auction and exploration.
Q. What is the ₹7,280-crore Rare Earth Permanent Magnet scheme?
Ans. Approved in November 2025, the ₹7,280-crore scheme aims to establish 6,000 metric tonnes per annum (MTPA) of integrated rare earth permanent magnet manufacturing capacity in India. It includes:
₹6,450 crore as sales-linked incentives over five years
₹750 crore as capital subsidy for manufacturing plants
Q. Why is India focusing on rare earth magnets now?
Ans. India accelerated its rare earth strategy after China imposed export restrictions in April 2025, causing shortages in India’s automobile and electric vehicle sectors.
Q. How dominant is China in the global rare earth supply chain?
Ans. China controls:
Over 60% of global rare earth mining
Nearly 92% of global refining capacity
More than 90% of rare earth magnet manufacturing
Around 30% of global rare earth exports
Q. How much rare earth does India import and from where?
Ans. India’s rare earth imports increased from $14.1 million in 2014 to $17.5 million in 2024.More than 45% of India’s rare earth imports come from China, highlighting India’s vulnerability to supply disruptions.
Q. What are rare earth elements and why are they critical?
Ans. Rare earth elements consist of 17 metals used in clean energy, electronics, electric vehicles, wind turbines, semiconductors, and defence systems.
According to the International Energy Agency, they are classified into:
Light rare earths (LREEs) such as lanthanum, cerium, neodymium
Heavy rare earths (HREEs) such as dysprosium and terbium
Q. Who produces rare earth oxides in India?
Ans. State-run Indian Rare Earths Ltd (IREL) is currently the sole producer of rare earth oxides and magnets in India. Under the ₹7,280-crore scheme, IREL will supply 500 tonnes of rare earth oxides t
o domestic manufacturers.