Budget 2026 backs rare earth corridors to build India’s magnet manufacturing muscle

NEW DELHI: To build self-sufficiency within India in rare earth magnets, Budget 2026 paved the way for establishing dedicated rare earth corridors in mineral-rich states of Odisha, Kerala, Andhra Pradesh and Tamil Nadu.

The announcement comes months after the govt had announced a near-Rs 7,300 incentive plan to promote the manufacturing of sintered rare earth permanent magnets used across industries such as automobiles, renewable energy, electronics, aerospace, and defence.


Finance Minister Nirmala Sitharaman said in her Budget speech on Sunday that this will complement the Rare Earth Permanent Magnets scheme that was launched late last year. “A Scheme for Rare Earth Permanent Magnets was launched in November 2025. We now propose 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.”

Also, to enhance domestic chemical production and reduce import dependency, she said that the govt will launch a scheme to support states in establishing three dedicated chemical parks, through challenge route, on a cluster-based plug-and-play model.

The FM also said that a strong capital goods capability is needed to ensure efficient productivity and quality across different sectors. Towards building this, she proposed establishment of hi-tech tool rooms by Central Public Sector Enterprises (CPSEs) at two locations as digitally-enabled automated service bureaus that locally design, test, and manufacture high-precision components at scale and at lower cost.

Also, Sitharaman said that a scheme for enhancement of Construction and Infrastructure Equipment (CIE) will be introduced. This, she said, will strengthen domestic manufacturing of high-value and technologically-advanced CIE. “This can range from lifts in a multi-story apartment, fire-fighting equipment, large and small, to tunnel-boring equipment for building metros and high-altitude roads.”

In November 2025, the Union Cabinet had approved a ‘Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets’ with a financial outlay of Rs 7,280 crore. The govt wants to establish 6,000 Metric Tons per Annum (MTPA) of integrated Rare Earth Permanent Magnet (REPM) manufacturing in India to enhance self-reliance in India and position the country as a key player in the global REPM market.

REPMs are one of the strongest types of permanent magnets and are vital for electric vehicles, renewable energy, electronics, aerospace, and defence applications. The scheme will support the creation of integrated REPM manufacturing facilities,

India and many countries across the world were in a fix when China — a key supplier of rare earths magnets — had put severe restrictions on its imports last year, leading to production disruption across many industries including auto, electronics, and defence.