In a world where advanced technologies and clean energy solutions are becoming increasingly reliant on critical minerals, the government of India is making a concerted effort to enhance its rare earth processing and manufacturing capacity – a move that has accelerated sharply over the past year. Rare earth elements (REEs) and their downstream products, such as rare earth permanent magnets (REPMs), are critical to the development of electric vehicles, renewable energy solutions, consumer electronics, aerospace, and defence sectors. Despite having large reserves of REEs, the country has traditionally been highly reliant on imports for its value-added processing.
Why Rare Earth Processing is Important
Rare earth elements are a set of 17 elements, such as neodymium, praseodymium, dysprosium, and others, which possess distinct magnetic, electronic, and catalytic abilities. These elements are essential in the manufacturing of high-performance magnets that power electric vehicle motors, wind energy turbines, hard disk drives, and military applications. Although the name is indicative of rarity, rare earth minerals are usually found in abundance; the problem lies in their processing and refining to produce workable metals and magnet alloys, which has been a Chinese monopoly for a long time.
As per government statistics, India has large reserves of rare earth minerals, estimated at 6.9 million tonnes, making it one of the most resource-rich nations in the world in terms of rare earth minerals. The states of Maharashtra and Gujarat alone hold major shares of the country’s domestic resources.
However, India’s current contribution to global processed output remains minimal, in part because most mined materials have historically been exported in raw or semi-raw form. This has constrained India’s ability to capture value from downstream manufacturing and has perpetuated dependence on foreign suppliers, particularly in China, which controls more than 85–90 % of global rare earth processing capacity.
Government’s Strategic Policy Response
To address this imbalance and build a complete domestic supply chain, the Indian government has initiated a series of high-profile policy measures aimed at boosting rare earth processing and magnet manufacturing. A cornerstone of this effort is the “Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets (REPM)”, approved by the Union Cabinet with a financial outlay of ₹7,280 crore (approximately USD 800 million) in November 2025.
The plan is intended to facilitate the setting up of integrated REPM manufacturing units with a cumulative capacity of 6,000 metric tonnes per annum (MTPA). These units will be used to refine rare earth oxides into metals, metals into alloys, and alloys into finished permanent magnets. This entire value chain is at the core of India’s plans to cut down its imports.
As part of the plan, sales-based incentives and capital subsidies will be provided to the shortlisted beneficiaries on the basis of a global competitive bidding process. It is clear that the government is trying to develop indigenous capabilities in areas such as electric vehicles, renewable energy, aerospace, and defense, where rare earth permanent magnets are a crucial requirement.
From Policy to Production: A Year-End Goal
In February 2026, Union Minister G. Kishan Reddy said that India is aiming to start the production of rare earth permanent magnets by the end of 2026, which is a significant achievement in the value chain localization process. This initiative is in line with the government’s National Critical Mineral Mission, which aims to develop capabilities in the exploration, beneficiation, processing, and recycling of critical minerals.
The government has shortlisted four states – Andhra Pradesh, Odisha, Maharashtra, and Gujarat – to set up Critical Mineral Processing Parks, which will help to concentrate the processing of rare earths. The groundwork for the development of these processing parks is being done, and efforts are being made to attract investments and collaborations between public and private sector entities.
Strategic and Economic Implications
Having a processing capability for rare earths has several strategic advantages for India. Even the aspect of import substitution could help India mitigate its vulnerability to the global supply chain, especially in the wake of recent export restrictions imposed by China on some rare earths and their products.
Apart from the aspect of import substitution, having a domestic processing capability would help India enhance its strategic positioning in the global high-tech manufacturing value chains, ranging from electric motor components to advanced aerospace defense systems. This would be in line with the government’s Atmanirbhar Bharat initiative.
The project also has strong economic spin-offs. The production of permanent magnets is a high-value area that holds the promise of employment generation, localisation of the supply chain, and export opportunities if India can leverage its competitive manufacturing prowess. The deficiencies in the country’s processing capabilities had earlier compelled India to rely on imports for its strategic magnets and rare earths, which was a cost burden on manufacturers and made them vulnerable to geopolitical challenges.
Challenges Ahead
Notwithstanding the strong policy focus and economic incentives, the achievement of the dream of a rare earth processing value chain in India would still require heavy investment and technological expertise. The processing of rare earth ores is a complex metallurgical operation that requires sophisticated infrastructure and environmental conditions, which would be a challenge in terms of both technical and economic requirements.
Further, although the country has abundant reserves, a substantial part of the current resource base is yet to be developed or categorized as ore, as distinguished from economically exploitable reserves.
Looking Forward
India’s move to increase the processing of rare earths is a turning point in the country’s resource and industrial policy. The country is finally seeking to develop its own mining and manufacturing capacity for rare earths, thereby cutting its dependence on imported rare earths and making it a critical hub in the global supply chain of critical minerals.
With the production of rare earth permanent magnets set to start by the end of 2026 and rare earth processing parks planned in several states, the rare earth ambitions of India, which have been limited by processing capacity, are finally set to enter a phase of systematic implementation. If successful, this move could enhance the technological sovereignty of India and make it more competitive in sectors that will drive the future global economy.
Sources
With 8% of world’s reserves, India poised to play key role in rare earth elements supply chain
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Rare earth permanent magnet production to start by 2026-end, says Minister Reddy
India to begin permanent magnet production by year-end, says G Kishan Reddy
India Expands Rare-Earth Exploration and Magnet Manufacturing
(IRuniverse Rohini Basunde)
