Small budget for a big bottleneck: India’s only rare earth producer gets modest capex hike

Subscribe to enjoy similar stories. NEW DELHI: Even as India pushes to localize rare earth supply chains, the Centre has budgeted ₹140 crore in capital expenditure for the country’s only domestic manufacturer of rare earth magnets and rare earth oxides—IREL (India) Ltd—in the next fiscal year, a modest 1.4% increase from FY26. The muted allocation for the state-run producer, outlined in Union budget documents, has sparked questions about whether India is under-investing in its only operational domestic supplier at a moment when shortages are hitting industries from automobiles to electronics.

Some, however, say policymakers are prioritizing incentives and corridors to draw in private investment, even though most private plans have yet to materialize. The investment funds for IREL, which was set up 76 years ago under the aegis of the Department of Atomic Science, have remained range bound between ₹120 crore and ₹140 crore since fiscal year 2024, with spending falling to ₹107 crore in FY25. The Centre does not directly provide budgetary support to IREL.

Instead, the company mobilizes funds through internal and extra-budgetary resources (IEBR). Budget documents specify the IEBR amount that IREL is expected to deploy for new capital expenditure. Queries emailed to IREL earlier on Monday remained unanswered till press time.

Domestic rare earth magnet production has drawn increased attention after China began restricting exports of such products, a supply chain it dominates. Sectors such as automobiles and electronics were among those that faced shortages of components containing rare earth magnets. Rishabh Jain, fellow at Council on Energy, Environment and Water (CEEW), said that IREL produces rare earth oxides and is one of