Two paths to rare earth security and India must walk both

Last week, the Indian government approved a Rs 7,280-crore scheme to build a domestic rare-earth magnet supply chain. The decision has brought rare earths back into policy focus–and highlights why India must look beyond geology alone.

Rare earth elements – essential for electric vehicle (EV) motors, electronics, wind turbines and defence technologies – are vital to the global economy’s future. India has about 6-7% of the world’s rare earth reserves, the third-largest globally. Much of the discussion, however, focuses on the difficulty of extracting them. Most of India’s reserves are trapped in monazite, a mineral that contains both rare earths and thorium. Because thorium is radioactive and governed by India’s atomic energy laws, mining and processing are tightly controlled by the State. This has slowed commercial development compared to China or Australia. This challenge dominates policy discussions.

But it is only half the story. The other half has gained real momentum over the past three to five years: the recovery of critical materials from lithium-ion batteries, used motor magnets, industrial scrap, and other waste streams. This route differs fundamentally from traditional mining. It bypasses the constraints of monazite and creates a viable, scalable domestic supply of rare earth-bearing materials.

These two streams — primary reserves and secondary recovery — are unfolding in parallel. Together, they present a far more compelling opportunity than either could on its own.

India’s reserves are well documented: monazite-rich beach sands along the coasts of Kerala, Tamil Nadu, and Odisha, along with smaller hard-rock deposits in Gujarat and Andhra Pradesh. The potential is significant. Light rare earths such as cerium, lanthanum, and neodymium are used in catalysts, glass polishing, and EV motor magnets, while heavy rare earths such as dysprosium and terbium are critical for high-performance magnets used in defence, electronics, and wind turbines.

Historically, a single public-sector enterprise, IREL, has been responsible for mining and processing. The result has been a highly concentrated structure, slow expansion, and limited downstream value addition.

Key elements required for EV motors and wind turbines—neodymium, praseodymium, and dysprosium—are all present in India’s sands. Mineral separation capabilities have improved but remain below potential. Facilities in Kerala, Odisha and Tamil Nadu have been upgraded, and capacity has expanded over the past decade. But value-added processing –such as alloys and magnets–remains nascent. The major gap is the absence of a full magnet-manufacturing supply chain despite the availability of raw materials, a gap the new scheme seeks to address.

Battery recycling companies have emerged as important players in this space. Once seen primarily as part of India’s clean-technology ecosystem, they are now closely linked to the critical-minerals agenda. Firms such as Attero are recovering rare earths including neodymium, praseodymium and dysprosium from e-waste and battery scrap. Others, such as LOHUM, have announced plans to build rare-earth refining capacity. Their refining and separation operations do not fall under the regulatory limitations of atomic minerals, allowing capacity to be scaled up far more quickly.

Rather than waiting for large-scale monazite extraction to take off, India can strengthen its position in the midstream — refining, chemical separation, metals, and magnets — by leveraging recycled inputs. The country generates a large and rapidly growing stock of industrial and consumer waste containing significant quantities of rare-earth-bearing materials. In FY 2023-2024, of the 1.75 million metric tons of e-waste generated - from discarded electronics, motors, and hard drives – only 43% was formally recycled. Companies that began by recycling lithium, cobalt, and nickel are now extending their scope to magnet materials found in drive motors, wind turbine components, and industrial machinery.

As EV adoption rises and battery turnover accelerates, this volume will only increase. India can position itself as an alternative source of refined materials and components even before its mining segment reaches scale. This is a realistic path because the skills, technology, and capital required for midstream processing are far more attainable than those needed to set up large integrated mining operations under atomic-energy constraints.

The policy environment is beginning to reflect this shift. New incentives for rare earth magnet manufacturing, growing support for battery recycling, and a focus on critical-minerals supply chains across ministries indicate a more integrated approach. However, the regulatory framework for atomic minerals, private-sector participation, and coordination across agencies still needs refinement.

India’s rare earth story is now a mix of geology and the circular economy. Its geological reserves give the country geological depth and long-term strategic advantage. Long-term potential will come from tapping India’s endowment. The circular-economy pathway provides near-term momentum through speed and flexibility because it sidesteps long-standing regulatory and processing constraints. Both streams reinforce India’s broader objectives: reducing import dependence, securing critical minerals, and supporting domestic manufacturing in sectors such as EVs, renewables, electronics, and defence.

Together, they give India a credible opportunity to build a resilient, diversified, and future-ready rare earth strategy at a time when global demand is only set to grow.

(The writer is a business leader, and board director with nearly four decades of experience)