OPINION | What the Budget reveals about India’s critical minerals goals

Critical minerals in India

India’s pursuit of its mineral resilience goals is increasingly framed as a strategic and geopolitical priority. This is evident in the country’s recent participation in fora such as the US-led Critical Minerals Ministerial, as well as in a flurry of bilateral and plurilateral diplomatic partnerships focused on critical mineral supply chains. The 2026–27 Union Budget, too, sought to signal seriousness on this front. Yet a closer reading reveals a gap between intent, ambition and execution.

Rare Earths in Rhetoric, Not in the Numbers

If one looks at the Union Budget speech, rare earths were mentioned on two occasions.

First, there was a reference to ‘The Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnet (REPM)’, announced in November 2025. This envisaged a ₹7,280 crore allocation spread over seven years, with the initial two years as a gestation period for constructing the required facilities. It marked India’s first effort to build an integrated domestic processing and manufacturing ecosystem and was structured as a sales-linked incentive alongside an initial capital subsidy of ₹750 crore to support the establishment of manufacturing facilities. Despite its mention in the speech, the scheme does not appear in the budget documents, and its capital subsidy component is entirely absent from the allocations.

Second, the Finance Minister proposed to “support the mineral-rich states of Odisha, Kerala, Andhra Pradesh and Tamil Nadu to establish dedicated rare earth corridors to promote mining, processing, research and manufacturing.” This statement is noteworthy, though further details are awaited. Most of the rare earths in these coastal states are present in beach sands, particularly in monazite, which is classified as a prescribed substance under the Atomic Energy Act due to its thorium content. Consequently, beach sand exploration and mining rights are restricted to the State. Unless a decisive regulatory overhaul permits monazite to be treated as a dual-use ore open to private participation, progress is likely to remain slow and fragmented.

Further, despite a ₹1,500 crore outlay announced in 2025 under the National Critical Mineral Mission (NCMM) for recycling, the budget statement omits any reference to it. Recycling is an underappreciated segment of the mineral value chain, with the potential to circumvent China’s dominance in processing by focusing on recovering value from e-waste rather than relying solely on primary mine production.

NCM - Ambition Meets Modest Allocations

Looking beyond the budget speech and into the numbers only reinforces this assessment. The NCMM was launched in January 2025 with a planned expenditure of ₹16,300 crore over seven years. However, annual allocations remain modest, with outlays for FY 2026 and FY 2027 (BE) at approximately ₹400 crore each. While multi-year initiatives often begin gradually before ramping up, the revised estimate for FY 2026 shows this figure falling further to approximately ₹90 crore. This suggests slow progress on the ground and underscores the nascent status of the NCMM.

Additionally, budget allocations for Geological Survey of India (GSI) activities and spending through the National Mineral Exploration and Development Trust (NMEDT) have remained broadly unchanged for three years, indicating similar institutional and funding constraints. The GSI undertakes much of the early-stage exploration work in the country and is tasked with completing 1,200 projects under the NCMM by 2031. Its activities include geological mapping, satellite imaging and other mineral assessments. NMEDT contributions are pooled from private companies and charged at 3% of the royalty they pay. These funds are collected by state governments, transferred to the Consolidated Fund of India, and utilised for exploration activities by the GSI, the Indian Bureau of Mines, and empanelled private players.

Exploration Bottlenecks and Auction Constraints

Frontloading exploration expenditure is essential to generate reliable data on mineral reserves, particularly since the 2015 amendment to the Mines and Minerals (Development and Regulation) Act shifted the allocation process from a first-come, first-served basis to auctions. Under an auction-based system, the availability of high-quality geological data becomes a binding constraint; without it, blocks become unattractive or subject to aggressive risk discounting. The largely unchanged expenditure of both the GSI and NMEDT over the past three years points to institutional capacity and funding challenges that may negatively affect the pipeline of auctionable blocks for subsequent private sector participation.

The policy focus should be on offering blocks for Mining Lease (ML) auctions after detailed exploration at the G1 and G2 stages, in accordance with the UNFC standards that India follows. The current budgetary outlay falls short in this regard.

Although 2025 witnessed the first auctions under the standalone Exploration Licence (EL) regime introduced through the MMDR Amendment Act, 2023 — with seven of thirteen blocks auctioned, three of them critical minerals — structural challenges persist. Long exploration timelines and high upfront capital costs, on which exploration companies’ revenues depend, are likely to deter participation, particularly in the absence of a preferential right to mine.

Two Policy Leverage Points

The lessons from these developments converge. The NCMM remains nascent, and considerable effort is required to accelerate implementation on the ground. Two policy leverage points stand out: exploration — particularly incentivising greater private sector investment at this stage — and the recycling segment of the value chain.

In exploration, the current framework offers 50% cost reimbursement capped at ₹20 crore, disbursed across six stages of the exploration process. This is modest when compared to total exploration costs of approximately ₹150 crore. The government should consider redesigning the EL regime to approach critical mineral extraction in a manner similar to semiconductor fabrication projects, providing upfront capital support that goes beyond simple cost reimbursement.

In recycling, India has the potential to emerge as a global hub for recycling and secondary processing, given its substantial e-waste generation. Formalising this ecosystem would require targeted financial incentives and clearer regulatory frameworks to enable the collection and integration of high-value feedstock. This remains an underutilised but promising lever in strengthening India’s mineral resilience.

(Shobhankita Reddy and Tannmay Kumarr Baid are researchers in technology geopolitics at the Takshashila Institution, Bangalore.)

Views are personal, and do not represent the stand of this publication.