Union finance minister Nirmala Sitharaman on Sunday proposed the establishment of dedicated rare earth corridors in Odisha, Andhra Pradesh, Tamil Nadu and Kerala as part of the Union Budget for 2026–27, aiming to reduce India’s dependence on imports and strengthen domestic capabilities in critical minerals.Presenting the Budget in Parliament, Sitharaman said the Center would “support mineral-rich states to promote mining, processing, research and manufacturing of rare earth elements and permanent magnets”, which are crucial for clean energy, electronics, defense and electric mobility. The finance minister said, “The budget proposes raising the Electronics Components Manufacturing Scheme outlay from 22,999 crores to 40,000 crores, alongside new initiatives such as ISM 2.0, rare earth corridors, and dedicated chemical parks.”The proposal builds on the scheme for rare earth permanent magnets that was launched in November 2025, she said, adding that the government now proposes to scale up support for states to establish dedicated corridors focused on the full value chain – from extraction to advanced manufacturing.
Reducing import dependence
Rare earth minerals are a group of 17 elements used in high-tech products such as electric vehicle motors, wind turbines, smartphones, semiconductors, defense systems and precision electronics. India currently imports a significant share of its rare earth requirements, with China dominating global production and processing.China controls a large portion of the world’s rare earth refining capacity and has, in recent years, tightened export controls on critical minerals, raising concerns over supply disruptions for manufacturing economies like India.The proposed corridors are aimed at building domestic capacity and insulating Indian industry from global supply shocks.
Polls bound states in focus
Two of the four states identified for the proposed rare earth corridors – Tamil Nadu and Kerala – are scheduled to go to Assembly polls later this year, bringing added political attention to the Budget announcement. Both states have significant coastal mineral reserves, including monazite-rich sands that contain rare earth elements, making them central to India’s critical minerals strategy. The proposed support for mining, processing and research infrastructure is expected to be closely watched in the run-up to the elections, particularly for its potential impact on investment, employment and industrial activity in the states.
Chemical parks and manufacturing push
As part of a broader industrial strategy, FM also announced a scheme to support states in setting up three dedicated chemical parks through a challenge-based route. The parks will follow a cluster-based, plug-and-play model to boost domestic chemical production and further cut import dependence. The measures are aligned with the government’s push to strengthen capital goods manufacturing and secure supply chains for strategic sectors.The Budget proposals come amid growing global competition for access to critical minerals, with countries accelerating efforts to localize production and processing of rare earths and other strategic materials.
