Union Budget 2026 proposes setting up of rare earth corridors in 4 states

Union Finance Minister Nirmala Sitharaman on Sunday proposed that the Indian government will set up rare earth corridors to bridge the country’s dependence on imports from other countries, such as China. 

The Finance Minister noted that the government intends to support mineral-rich states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to help set up dedicated rare earth corridors to promote mining processing, research, and manufacturing to enhance domestic chemical production and reduce import dependency. 

The government will also launch a scheme to support states in establishing three chemical parks through a challenge route on a cluster-based plug-and-play model. This means that states must submit bids to demonstrate why they are the best fit through a competitive funding model. A cluster-based approach means small and medium units could share expensive facilities.

The proposal, part of the Union Budget 2026-27’s target to encourage economic growth through advanced manufacturing, comes as a huge sigh of relief for sectors, including automotive, defence, aerospace, and electric vehicles (EVs).

Many EV original equipment manufacturers (OEMs) had sounded the alarm in 2025 after China imposed export restrictions on permanent heavy rare earth magnets. For context, India imports around 80-90% of its rare earth magnet requirements from Chinese suppliers as of 2024-2025, according to reports. 

Companies have since rerouted supply chains, depending on alternative suppliers, and some of them are also developing rare-earth-free motors. 

The government has since taken multiple steps to help ease supply chain challenges for rare earth magnets. In November, the Cabinet approved a Rs 7,280 crore scheme to promote the manufacturing of sintered rare earth permanent magnets (REPM).

This initiative aims to establish a fully integrated domestic value chain for producing 6,000 metric tonnes per annum (MTPA) of rare earth permanent magnets.