Budget's rare chance: Leveraging the new oil beneath India’s feet

Imagine a world running on advanced technology – electric vehicles silently gliding, smartphones connecting us instantly, and defence systems protecting our borders. What's the hidden ingredient powering much of this innovation? It's rare earth elements (REEs), often dubbed the 'new oil' of the 21st century. India is now strategically positioning itself to leverage its significant rare earth reserves, a move that could redefine its economic trajectory and global standing, with the upcoming Budget 2025-26 serving as a critical accelerator.

The global rare earth landscape is dominated by China, which accounts for over 60% of global rare earth production and an even larger share (over 80%) of processing capacity. This near-monopoly has raised significant geopolitical concerns, especially among Western nations and major economies, regarding supply chain security and potential weaponization of these critical minerals. India, with an estimated 6% of the world's rare earth reserves, ranking among the top five globally, has historically been a minor player, primarily extracting beach sands for certain REEs through its public sector undertaking, Indian Rare Earths Limited (IREL). However, the focus has largely been on raw material extraction rather than value-added processing and manufacturing.

What's happening now is a concerted shift in India's strategy. Recognizing the indispensable role of REEs in critical sectors like electric vehicles (EVs), semiconductors, wind turbines, medical imaging, and advanced defence systems, the Indian government has launched a proactive push. This renewed focus aligns perfectly with the 'Aatmanirbhar Bharat' (self-reliant India) initiative, aiming to reduce import dependence and build domestic manufacturing capabilities. The government is actively promoting this sector through new missions and policy reforms, which include streamlining mining regulations, encouraging private sector participation, and fostering indigenous processing technologies. The upcoming Budget 2025-26 is seen as a crucial opportunity to provide financial incentives, allocate funds for research and development, and create an ecosystem conducive to rare earth processing and magnet manufacturing within India.

Several key stakeholders are involved in this ambitious endeavour. The **Government of India**, particularly the Ministry of Mines, Ministry of Commerce & Industry, and NITI Aayog, is the primary driver, formulating policies, providing strategic direction, and allocating budgetary support. **Indian Rare Earths Limited (IREL)**, a PSU under the Department of Atomic Energy, remains a significant entity, holding exclusive rights for mining certain beach sand minerals that contain REEs. The **private sector**, both domestic and international, is crucial for investment in advanced mining, processing, and manufacturing technologies. **Research and Development institutions** like CSIR labs and various IITs are vital for developing cost-effective and environmentally sustainable extraction and separation techniques. Globally, countries like the USA, Japan, Australia, and the European Union, keen to diversify their rare earth supply chains away from China, represent potential partners for India, offering technology transfer and investment.

This strategic focus carries immense significance for India. Economically, it promises substantial growth through value addition, job creation across the mining, processing, and manufacturing segments, and a significant boost to exports. Reducing import dependence for critical components will save foreign exchange and insulate India from global supply shocks. From a national security perspective, indigenous rare earth capabilities are vital for defence production and space technology, ensuring strategic autonomy. Technologically, it positions India as a hub for advanced manufacturing, attracting investments in EV battery production, semiconductor fabrication, and renewable energy components. Geopolitically, possessing and processing these critical minerals could enhance India's leverage in international relations, making it a crucial player in global supply chain resilience efforts.

Historically, India's engagement with rare earths has been limited, primarily focusing on the extraction of monazite sands. The shift now is towards a comprehensive strategy encompassing the entire value chain, from exploration to refining and manufacturing finished products. This mirrors the global recognition of critical minerals as strategic assets, a trend that intensified after the 2010 rare earth crisis when China restricted exports.

The legal and constitutional framework underpinning this push includes the **Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act)**, which governs mineral exploration and mining. Recent amendments, such as those in 2015 and 2021, have aimed to streamline the auction process, promote private sector participation, and introduce provisions for critical minerals. The **National Mineral Policy, 2019**, further emphasizes sustainability, enhanced exploration, and value addition. Constitutionally, **Article 246** of the Seventh Schedule places 'mines and mineral development' under the Union List (Entry 54), granting the Parliament the power to legislate on this subject, especially regarding regulation and development. Additionally, **Article 297** vests all lands, minerals, and other things of value underlying the ocean within India's territorial waters, continental shelf, and exclusive economic zone in the Union, which is particularly relevant for beach sand minerals.

Looking ahead, the future implications are profound. India could emerge as a significant alternative supplier of rare earths, attracting substantial foreign investment and fostering strategic alliances. However, challenges remain, including the need for significant capital investment, overcoming technological gaps in advanced processing, and addressing environmental concerns associated with rare earth mining and refining. Success in this sector will bolster India's 'Make in India' and 'Atmanirbhar Bharat' initiatives, strengthen its position in global critical mineral supply chains, and reinforce its ambition to become a leading manufacturing hub for future technologies. The Budget 2025-26, therefore, is not just a financial statement but a blueprint for India's strategic leap into the future of critical minerals.