Open Forum

New Delhi, 24 December 2025

Rare Earth Elements

GEOPOLITICAL BARGAINING CHIP

By Dhurjati Mukherjee 

Rare earth elements (REEs) have come into sharp focus in recent times, with the search for minerals such as neodymium, praseodymium, dysprosium and terbium gathering momentum in India. These elements power modern life—ranging from electric vehicles and wind turbines to smartphones and defence systems. Dubbed the “new oil,” REEs have also emerged as a geopolitical bargaining chip, with China controlling nearly 90 per cent of global processing capacity. India, however, has accorded the sector high priority, and the outcomes of this push are likely to become evident in the coming years.  

In fact, the Centre recently notified the Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnet (REPM) with an outlay of Rs 7280 crore. The scheme aims to establish an integrated manufacturing facility annum of rare earth permanent magnets. with a capacity of 6000 metric tonnes and is destined to make the country self-sufficient in the not-too-distant future. The government will allot manufacturing capacity to five beneficiaries through global competitive bidding. Each beneficiary will be allotted an annual capacity of up to 1200 million tonne. This will obviously go a long way in reducing dependence on China for critical inputs and secure supply chains for EVs, electronics, aerospace and green energy. 

At the last G-20 summit at Johannesburg in South Africa, a Critical Minerals Circulatory Initiative was proposed by Prime Minister Modi as clean energy was essential and critical minerals have a huge role to play. “This initiative can support joint research, technology standards and pilot recycling facilities in the Global South”, said he. Obviously, this comes amid concerns of China leveraging its chokehold over supply of rare and critical minerals to further its strategic goals.  

India is among the three countries having the highest reserves of rare earth. It is envisaged that the country will be among the leading producers of permanent magnets in the coming years. The scheme will be in place for seven years from the date of award, including a two-year gestation period for setting up the manufacturing facility. 

Keeping in view the expanding applications of rare earths, it is gratifying that the government has planned a major push to strengthen its rare earth magnet manufacturing capacity, with the government considering a proposal to nearly triple the size of its incentive programme to more than Rs 70 billion ($788 million), reported Bloomberg. The move aims to build domestic capability in a critical industry that is currently dominated by China. According to the report, the new plan represents a major step up from the earlier $290 million initiative, which was focused on ensuring supplies of essential materials for electric vehicles, renewable energy, and defence sectors. 

Current estimates put the reserves of China at 66 million tonnes, far ahead of India (6.9 MT) and the US(1.9 MT). Today the Chinese control around 61 percent of REE mining and well over 90 percent of processing. They also have a technological lead in the field, which is even recognised by the US. India’s production went up from 445 kilo tonnes per annum in FY20 to 532 KTPA in FY24, which shows a steady rise and may increase further in the coming years. 

At present, India produces about 8 of the 17 rare earths, mainly from beach-sand minerals such as monazite. But high value steps need to be taken by India through technological upgradation. Keeping in view the need to triple capacity by 2031-32 and the tie-ups with Oil India, Coal India and NLC, it is necessary to ensure fast-tracked procurement of corrosion-resistant solvent extraction and gear up magnet grade output. 

It may be pertinent to mention here that in Andhra Pradesh with a 947 km coastline, the beach sands contain vast quantities of monazite, the primary source of rare earth elements (REEs) and thorium along with limonite, ruttle, zircon, garnet and sillimanite, making the state a rich natural repository of strategic minerals. Estimates made by the Atomic Minerals Directorate and Indian Rare Earths Limited (IREL) place India’s total deposits at over 300 million tonnes of heavy mineral sands rich in dense and valuable minerals like limonite and zircon. These deposits are enough to support 40-50 percent of domestic rare earth requirements for decades. 

In fact, the rare earth magnet sector is crucial to India’s long-term plans for electric mobility, renewable energy, and defence manufacturing. With global demand expected to surge in the coming decade, India’s Rs 70 billion incentive programme could mark the beginning of a strategic shift to secure critical materials and reduce import dependence. 

Thus, the country’s thrust on the rare earths sector comes at an opportune time when several countries are trying to diversify their rare earth supply chains after China tightened export controls earlier this year amid its trade tensions with the United States. Earlier this year, Prime Minister Modi had warned that critical minerals should not be “weaponised” and called for stable and diversified supply chains. 

Currently, domestic rare earth production remains unviable without government support. State-owned companies have taken the lead in forming overseas mining partnerships to secure access to raw materials. India continues to lag behind in technology and refining capacity, which are still concentrated in China. But even then, analysts are of the opinion that India’s plan could face challenges if China’s recent easing of export restrictions for the US and EU is extended to India. Cheaper access to Chinese magnets may reduce the incentive for investors to build local manufacturing capacity. 

To increase e-waste availability, a firm called Attero has launched SelSmart in 19 cities, offering consumers a better price for their end-of-life electronic products. Meanwhile the company has been currently processing around over 12,000 tonnes of electronic waste per month and around 10 percent of the output by volume consists of critical minerals. While there has been some expansion of authorised collection centres in retail stores and public spaces, including door-to-door drives by municipalities and private companies and the growing use of digital platforms, it is not seen as enough at this point of time.  

This current trend underlines a strategic risk: while India’s REE consumption remains modest today, growing demand across defence, clean energy, EV and electronics could render this dependence a significant vulnerability. As things stand today with the government taking a proactive stand, India should emerge a key player in rare earth manufacturing. The primary aim of the new mission is obviously import substitution and the fiscal incentives should position India as a key player in the global market. 

According to reports, India expects a two-fold increase in REPM consumption by 2030 compared to 2025, primarily due to higher demand from electric vehicles, renewable energy, industrial sectors and consumer electronics. The dependence on China may not be much, say after a few years due to domestic refining capacity which is set to improve.---INFA 

(Copyright, India News & Feature Alliance)