India’s only rare earth producer gets modest capex hike
The quiet allocation to the state-run manufacturer outlined in Union budget documents has sparked questions about whether India is underinvesting in its only operational domestic supplier at a time when shortages are hitting sectors from automobiles to electronics.
But some say policymakers are prioritizing incentives and corridors to attract private investment, even though most specific plans have yet to be implemented.
Founded 76 years ago under the auspices of the Department of Atomic Science, IREL’s investment funds ₹120 crore and ₹140 crore since fiscal 2024, while expenditures have decreased in 2024 ₹107 crore in FY25.
The Center does not provide direct budget support to IREL. Instead, the company mobilizes funds through internal and extrabudgetary sources (IEBR). The budget documents state the amount of IEBR that IREL is expected to allocate for new capital expenditure.
Questions emailed to IREL early Monday remained unanswered by press time.
China’s Strait and its risks
Domestic rare earth magnet production has received increased attention after China began restricting exports of such products, a supply chain dominated by China. Industries such as automobiles and electronics were among those experiencing shortages of components containing rare earth magnets.
Council on Energy, Environment and Water (CEEW) member Rishabh Jain said IREL produces rare earth oxides and is one of the few global organizations with commercial “mine-to-oxide” capabilities outside China.
“However, unlike in the past where low demand led to exports, domestic demand for rare earths due to magnet production is expected to be higher than IREL’s production capacity, necessitating a shift from export to domestic prioritization. Reducing import duty for monazite sands will also help in the short term,” he said. “Scaling up requires not only the expansion of mining but also significant investment in downstream separation facilities from IREL, which remains the sole authorized processor of monazite.”
Monazite is a mineral rich in rare earth elements.
There are also concerns about institutional capacity. Last year, questions were flagged regarding IREL operating without a full-time president and chief executive between December 2024 and November 2025.
Private sector pressure and its consequences
In the Union FY27 budget announced on Sunday, Finance Minister Nirmala Sitharaman said the government will support the creation of four rare earth corridors in Odisha, Tamil Nadu, Kerala and Andhra Pradesh to facilitate rare earth mining, exploration, production and processing in India.
The announcement came three months after the government launched a campaign. ₹7,280 crore scheme to promote domestic production of rare earth magnets.
While companies such as JSW, Sona Comstar, Bharat Forge, Proterial and Midwest Advanced Materials Private Ltd have expressed initial interest in joining the programme, none of their plans have materialized so far.
This leaves IREL as the only major domestic producer of rare earth oxides and magnets as of now.
Crisil Ratings director Poonam Upadhyay said the strategic emphasis has shifted from enterprise-specific expansion to creating a broader, competitive ecosystem spanning mining, processing and downstream processes.
“This is evident in the rare earth permanent magnet incentive framework, which allocates capacity to multiple qualified beneficiaries through a competitive process. The budget strengthens this approach by materially increasing allocations at the ministry of mines level,” he said.
“Revenue allocation sharply ₹Approximately 3,635 crore for fiscal year 2027 ₹490 crore in the revised fiscal year 2026 estimate. This signals an early-stage push into critical minerals, with a clear focus on rare earths, in line with India’s Atmanirbhar goals,” added Upadhyay.
What can IREL produce and what is holding it back?
Originally called Indian Rare Earths Ltd, the company was founded in 1950 under the rule of independent India’s first prime minister, Jawaharlal Nehru, to produce thorium to support India’s nuclear energy programme. Over time, it has diversified into other rare earths, including the recently opened rare earth magnet factory in Vishakhapatnam.
The government-backed enterprise can currently produce around 400 tonnes of rare earth oxide per year, which can be used to produce around 1,200 tonnes of magnets. IREL also has a stockpile of approximately 500 tonnes of rare earth oxides, enough to support the production of approximately 1,500 tonnes of magnets.
Rare earth magnets are used in all vehicles, including electric (EVs) and internal combustion engine (ICE) vehicles. According to an August 2025 report by consulting firm Primus Partners, each electric vehicle requires approximately 1-2 kg of rare earth magnets.
The company noted that India consumed approximately 1,700 tons of rare earth magnets in 2022 and demand is expected to increase to 7,154 tons by 2030.
These estimates refer to neodymium-iron-boron (NdFeB) magnets, which contain dysprosium and are among the strongest and most widely used rare earth magnets.
IREL told lawmakers that producing rare earth magnets is expensive and must be handled carefully to avoid harming the environment.
In December 2025, the parliamentary committee on public enterprises (COPU) asked IREL to accelerate business operations related to expansion and joint ventures, encouraged it to cooperate with global companies in the rare earth value chain, and said the company should never lower its guard on environmental impacts resulting from its operations.
IREL told COPU that due to the strategic nature of the minerals it extracts, steps have been taken to avoid public consultation on all projects related to national security and atomic energy to ensure rapid receipt of regulatory permits, including environmental approval and early commissioning of projects.
“Environmental impact of RE (rare earth) Mining is primarily due to the complex and often toxic nature of the ore body, which contains a variety of radioactive and non-radioactive impurities requiring extensive use of water and chemicals/alkali/acids to extract the material. Origin of REE in Indian context (rare earth elements) IREL, in its response to the government’s advice on environmental degradation due to mining, “occurs in conjunction with radioactivity, making the extraction process long, complex and expensive.” he said.
IREL also said it has obtained all necessary environmental clearances from the ministry of environment, forests and climate change, has used technology to make wastewater less toxic and adopted new machinery to reduce waste and increase recovery.
