India’s REE Strategy: Turning Resources into Capacity

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Rare Earth Elements (REEs) are a group of 17 metals essential for a wide range of modern technology, including high-performance magnets, electronics, clean energy technologies, and advanced defence systems. In April 2025, China placed export restrictions on seven rare earth elements and their magnets in response to escalating American tariffs. Since China controls over 90 percent of global REE refining and magnet manufacturing, this jolted global supply chains. India, being heavily reliant on imports for these products, faced immediate repercussions in its clean energy and electronics sectors. In a significant setback, Indian automakers were forced to cut production targets due to supply shortages.

Figure 1: Country-wise imports of REEs by India (in tonnes)

Data: Ministry of Mines, Government of India

The growing concern over REE supply disruption has prompted the government to start planning an REE-focused scheme with a budget of INR 3,500-5,000 crore to attract investment in processing and magnet manufacturing. To meet its objectives, the scheme must be designed to respond not just to India’s aspirations, but also to its current limitations in the domain.

India’s REEs Landscape

India has the third-largest reserves^[1] of REEs, estimated at 6.9 million metric tons or 7.6 percent of global reserves. India’s principal source of REEs is monazite sands. It has coastal, inland, and riverine placer deposits as well as hard rock reserves of REEs.

Table 1: State-wise mapping of REE deposits in India

*Inclusive of indicated, inferred and speculative categories

Data: Minerals Yearbook 2023, Journal of Chennai Academy of Sciences 

India’s REE reserves are overwhelmingly skewed toward light rare earth elements (LREEs), which have bulk industrial applications. Heavy rare earth elements (HREEs), essential for high-tech, strategic, and defence applications, are present but not in extractable concentrations. Recent geological surveys by the Geological Survey of India (GSI) have expanded the known inventory, notably identifying approximately 2.15 million tonnes of REE anomalies in Arunachal Pradesh and 28.6 million tonnes in Assam, which may incrementally strengthen India’s HREE base.

India’s REE production is currently led by IREL (India) Ltd (formerly Indian Rare Earths Ltd), a public sector enterprise under the Department of Atomic Energy. It was the sole player till 2023 because REE exploration and mining were restricted to state-owned enterprises until an amendment to the Mines and Minerals (Development and Regulation) Act (MMDRA) opened the sector to private participation.

India’s REE reserves are overwhelmingly skewed toward light rare earth elements (LREEs), which have bulk industrial applications. Heavy rare earth elements (HREEs), essential for high-tech, strategic, and defence applications, are present but not in extractable concentrations.

The Miniratna company achieved its highest ever mineral production of 531,000 tonnes in FY 2023-24. In line with India’s broader critical minerals push, IREL aims to further scale ore processing capacity to 50 million TPA and increase the output of Rare Earth Oxides by three times to 13,000 tonnes by 2032. IREL is also the sole domestic producer of REE magnets, operating a samarium-cobalt magnet facility in Visakhapatnam.

India’s REE Challenges

Despite the size of its reserves, India contributes only 0.7 percent to the world’s mine production. India’s reserves remain underexploited due to geological, regulatory, market, and technological constraints.

The primary issue with India’s reserves is that the purity and concentration of REEs ores is low (for example, neodymium and praseodymium at 0.0011 to 0.012 percent in beach sand ores), leading to higher recovery costs and technological inefficiencies. Additionally, environmental and regulatory constraints, particularly those linked to the radioactive nature of monazite, hamper large-scale extraction. Many REE-rich zones are subject to Coastal Regulation Zones regulations, forest protection laws, and habitation-related restrictions, which complicate mining leases and project implementation. The lack of environmental regulation is one of the primary reasons that China was able to rapidly scale REE extraction and processing, although this happened at great cost to its environment.

The sector continues to be constrained by the lack of private players. Despite the 2023 MMDRA amendment, private uptake has been limited due to high entry barriers and insufficient commercial incentives. REE processing activities are heavily regulated, particularly those related to monazite.

Finally, there is a lack of industrial-scale facilities for intermediate stages such as alloy production and magnet fabrication. While IREL has capabilities from mining to metal extraction, technologies for separation and purification, especially for HREEs, remain limited. Broader midstream capacity consisting of separation plants, refining infrastructure, and alloy production is also nascent. The High Pure Rare Earths Plant in the Refining Division reduced production by 9 percent in FY 2023-24 due to a lack of downstream demand, underlining the absence of midstream utilisation.

India’s Current REE Initiatives

Recognising the significant vulnerability, the Government of India has introduced a series of REE-related interventions. At the policy level, apart from the MMDRA amendment, the government launched the National Critical Mineral Mission with an outlay of ₹16,300 crore. The mission is aimed at bolstering exploration, processing, and recycling of critical minerals, including REEs. In a significant policy reversal, in June 2025, India directed IREL to suspend a long-standing export agreement with Japan to retain neodymium and other critical REEs for domestic use.

To enhance vertical integration, IREL has begun a partnership with the Bhabha Atomic Research Centre to pilot new technologies and improve magnet manufacturing. It has also commenced projects for REE extraction and processing in Odisha with an installed capacity of 11,200 TPA of mixed rare earth chlorides and joint ventures with Tamil Nadu Minerals Limited and Industrial Development Corporation of Odisha Limited for beach sand mineral extraction. Further upstream, GSI has ramped up exploration activities, particularly in northeastern India and Rajasthan.

While policy momentum is evident, India needs to calibrate this carefully to navigate its HREE scarcity and convert its LREE reserves into industrial leverage.

Commercially, Midwest Advanced Materials, backed by the Department of Science, is partnering with TRAFALGAR Group to produce NdFeB magnets with an initial capacity of 500 tonnes/year by 2026, potentially scaling to 5,000 tonnes by 2030. The Centre for Materials for Electronics Technology, a research unit under MeitY, signed a transfer of technology agreement with Somal Magnets for the production of rare-earth magnets.

Policy Recommendations

India has been making active efforts to build resilience across the supply chain. But despite these efforts, the gap between resource potential and actual capacity remains wide. In order to translate policy intent into a viable industrial ecosystem, the upcoming scheme will need to address a number of gaps in the ecosystem.

1. India has relatively abundant LREE resources, but HREE are scarce. This asymmetric endowment underscores the need for distinct priorities within each subgroup. The policy architecture for LREEs must focus on industrial expansion and access to higher-grade ores that India can process. Securing HREEs will require substitution research and access to refined metals through strategic international partnerships.
2. India needs to expand its domestic sources of raw materials by encouraging more private players to contribute to the sector and through investments and partnerships for R&D of new technologies. For the former, it may need to look into risk-sharing mechanisms and financial incentives. For the latter, it should focus on separation technologies for low-grade ores, recovery from industrial waste, and recycling from end-of-life products.
3. India’s current capacity building for LREEs needs to be accompanied by efforts to bridge the midstream infrastructure gap. The development of alloy production, refining, and magnet fabrication industries will require measures such as viability gap funding, production-linked incentives, guaranteed offtake agreements, or dedicated industrial zones. 

Conclusion

India's rare earth ambitions sit at the intersection of strategic necessity and industrial opportunity. While policy momentum is evident, India needs to calibrate this carefully to navigate its HREE scarcity and convert its LREE reserves into industrial leverage. Success in this domain will be critical for India to prepare its economy for an increasingly fractured and competitive global resource landscape.

Amoha Basrur is a Junior Fellow at the Centre for Security, Strategy, and Technology at the Observer Research Foundation.

^[1] Reserves refer to the portion of overall resources that are economically feasible to extract under current conditions.

• Energy
• India
• HREE
• India REE strategy
• IREL
• LREE
• magnet manufacturing
• monazite sands
• national critical mineral mission
• rare earth elements
• REE processing
• REE reserves

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