Explained: Rare Earth corridors - Odisha’s role in India’s critical minerals strategy

In a significant strategic move, Finance Minister Nirmala Sitharaman unveiled the plan for dedicated Rare Earth corridors in the Union Budget 2026-27, aimed at building a resilient domestic ecosystem for critical minerals and reducing dependency on global supply chains, which is dominated by China. 

The initiative underscores India’s pursuit of self-reliance in technologies ranging from electric vehicles and renewable energy to defence and electronics.

Rare Earth and the Announced Corridors

Rare Earth elements are a group of 17 minerals used in high-technology and clean-energy applications, including permanent magnets, electric motors, wind turbines, mobile phones, and defence equipment. Despite the name, these minerals are relatively abundant, but their refining and processing capacity is highly concentrated in a few countries, particularly China.

Under the Budget proposals, the government will support mineral-rich states Odisha, Kerala, Andhra Pradesh and Tamil Nadu to develop Rare Earth corridors that link mining, processing, research and manufacturing facilities. These corridors are designed to create integrated clusters that reduce supply bottlenecks and improve cost efficiency across the value chain.

Why These Four States, Including Odisha?

The identified states sit on significant monazite-bearing deposits along coastal belts and mineral sands. India’s Rare Earth potential is estimated at over 13 million tonnes of monazite deposits, translating into around 7.23 million tonnes of rare Earth oxides, a key raw material for downstream industries.

In Odisha, beach sands and inland belts around Ganjam district and other coastal stretches are particularly rich in heavy minerals, including monazite, ilmenite and zircon, making them strategically valuable for the planned corridors. Coastal infrastructure and ports in these states further support logistics, refining and export potential.

Strategic Imperative: Reducing China Dependence

China currently dominates global rare Earth supply chains, accounting for roughly 60% of mining output and more than 90% of refining capacity and permanent magnet production. This near-monopoly has repeatedly exposed international markets to supply disruptions when Beijing imposes export controls or licensing limits.

In April 2025, China restricted exports of certain Rare Earth elements and permanent magnets, triggering shortages and supply delays in India’s automotive and EV sectors. Indian companies reported significant production bottlenecks as a result.

The corridors are part of India’s broader strategy to decrease reliance on Chinese imports, particularly for Rare Earth permanent magnets, which India currently imports in large quantities despite holding large reserves. By building processing and manufacturing capacity at home, New Delhi aims to strengthen the entire value chain and reduce strategic vulnerabilities.

Building on Earlier Measures

The Rare Earth corridor initiative builds on a November 2025 policy that approved a Rs 7,280-crore incentive programme to promote domestic Rare Earth permanent magnet manufacturing with an annual capacity of 6,000 metric tonnes.

Industry experts say the corridors could unlock greater integration from mining to finished magnets, a segment where China has historically held a tight grip, thereby supporting sectors like EVs, renewable energy, telecommunications and defence.

Global Context and Geopolitical Significance

The Budget announcement comes amid global efforts by the United States, European Union, Japan and others to diversify rare Earth supply chains and reduce dependency on China. The U.S. recently proposed a multi-billion-dollar stockpile of critical minerals, and Japan has initiated deep-sea extraction projects to secure alternative sources.

Analysts say that, with rising demand for clean energy technologies and strategic materials, countries are increasingly viewing rare Earths, and the infrastructure to refine and process them, as essential to economic security and technological autonomy.

Balancing Growth, Environment and Capability

While India’s rare Earth reserves position it among the world’s top holders, challenges remain. Refining and processing are capital-intensive, require advanced technology, and involve environmental risks that demand careful regulation and sustainable practices. 

Nevertheless, the corridor model is seen as a step toward creating an integrated domestic value chain capable of supporting future-focused industries.