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2 Feb 2026·Source: The Indian Express
3 min
EconomyScience & TechnologyInternational RelationsNEWS

Budget 2026: Customs Duty Exemptions for Rare Earths, Critical Minerals

Budget supports rare earths, critical minerals to cut China reliance.

Budget 2026: Customs Duty Exemptions for Rare Earths, Critical Minerals

Photo by Paul-Alain Hunt

The budget includes measures to reduce reliance on China for rare earths and critical minerals. This involves providing customs duty exemptions to encourage domestic production and processing. Rare earth elements are essential for various industries, including electronics, renewable energy, and defense.

By incentivizing local production, the government aims to strengthen supply chain resilience and reduce strategic vulnerabilities. This initiative aligns with broader efforts to promote self-reliance in key sectors.

Key Facts

1.

Customs duty exemptions: Rare earths, critical minerals

2.

Objective: Reduce reliance on China

UPSC Exam Angles

1.

GS Paper 3: Economy - Resource mobilization, industrial policy

2.

GS Paper 2: Government policies and interventions for development in various sectors

3.

Connection to Make in India initiative and Atmanirbhar Bharat

4.

Potential for questions on critical minerals, supply chains, and government policies

Visual Insights

Budget 2026: Rare Earths and Critical Minerals

Overview of the budget's focus on rare earths and critical minerals, aiming to reduce reliance on China and boost domestic production.

Budget 2026: Rare Earths & Critical Minerals

  • ●Customs Duty Exemptions
  • ●Rare Earth Elements
  • ●Critical Minerals
  • ●Reduce China Dependence
More Information

Background

The push for domestic production of rare earth elements and critical minerals is rooted in concerns about supply chain vulnerabilities. Historically, many countries have relied on a few dominant suppliers, creating strategic risks. The concept of strategic autonomy, where a nation aims to reduce dependence on others for essential resources, has gained prominence. Over time, disruptions in the supply of critical minerals have highlighted the need for diversification. Events like trade disputes and geopolitical tensions have underscored the fragility of global supply chains. This has led to increased focus on resource nationalism, where countries prioritize domestic control over natural resources. Several countries have enacted policies to secure their access to critical minerals. These include investments in domestic mining, processing, and recycling capabilities. International collaborations and agreements are also being pursued to diversify supply sources. The Mines and Minerals (Development and Regulation) Act, 1957 in India governs the mining sector.

Latest Developments

The current focus on rare earths and critical minerals is part of a broader global trend. Many countries are investing heavily in securing their supply chains for these resources. This includes initiatives to promote domestic production, recycling, and research into alternative materials. The Production Linked Incentive (PLI) scheme is also relevant in this context. There are ongoing debates about the environmental and social impacts of mining these minerals. Concerns about land degradation, water pollution, and community displacement are being raised. Balancing economic development with environmental sustainability is a key challenge. Institutions like the Ministry of Environment, Forest and Climate Change play a crucial role. Looking ahead, the demand for rare earths and critical minerals is expected to continue to grow. This is driven by the increasing adoption of electric vehicles, renewable energy technologies, and advanced electronics. Securing a stable and sustainable supply of these resources will be crucial for future economic growth and technological advancement.

Frequently Asked Questions

1. What are the key facts about the customs duty exemptions for rare earths and critical minerals for UPSC Prelims?

The budget includes customs duty exemptions for rare earths and critical minerals to encourage domestic production and reduce reliance on China. These minerals are crucial for industries like electronics and renewable energy. The initiative aims to strengthen supply chain resilience and promote self-reliance.

2. Why is the government focusing on rare earths and critical minerals now?

The focus is driven by concerns about supply chain vulnerabilities and the desire to reduce dependence on China. Many countries are now investing in securing their supply chains for these essential resources to achieve strategic autonomy.

3. How does the customs duty exemption impact the common citizen?

By promoting domestic production, the initiative can lead to more stable supply chains, potentially reducing price volatility in products that rely on these minerals (e.g., electronics, renewable energy technologies). This can also create jobs in the domestic mining and processing sectors.

4. What are the recent developments related to rare earths and critical minerals?

Many countries are investing in securing their supply chains for these resources, promoting domestic production, recycling, and research into alternative materials. The Production Linked Incentive (PLI) scheme is also relevant in this context.

5. What is the objective of providing customs duty exemptions for rare earths and critical minerals?

The primary objective is to reduce reliance on China for these essential resources. By incentivizing domestic production and processing, the government aims to strengthen supply chain resilience and reduce strategic vulnerabilities.

6. What is the historical background to the push for domestic production of rare earth elements?

Historically, many countries have relied on a few dominant suppliers, creating strategic risks. The concept of strategic autonomy, where a nation aims to reduce dependence on others for essential resources, has gained prominence.

7. What are the pros and cons of providing customs duty exemptions for rare earths and critical minerals?

Pros include increased domestic production, reduced reliance on China, and strengthened supply chain resilience. Cons might include potential environmental impacts from increased mining and processing activities, and the need for careful regulation.

8. What reforms are needed to ensure the success of this initiative?

Reforms may include streamlining environmental regulations, investing in research and development for sustainable mining practices, and promoting collaboration between government, industry, and research institutions.

9. What government initiatives, besides customs duty exemptions, are relevant to this topic?

The Production Linked Incentive (PLI) scheme is also relevant, as it aims to boost domestic manufacturing across various sectors, potentially including rare earth and critical mineral processing.

10. What are the important concepts related to this topic?

Key concepts include rare earths, critical minerals, customs duty exemptions, strategic autonomy, and supply chain resilience. Understanding these concepts is crucial for analyzing the implications of the budget announcement.

Practice Questions (MCQs)

1. Consider the following statements regarding rare earth elements: 1. They are essential for various industries, including electronics, renewable energy, and defense. 2. The recent budget proposes to impose customs duty on the import of rare earth elements to promote domestic production. 3. China holds a dominant position in the global production and processing of rare earth elements. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.1 and 3 only
  • C.2 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: B

Statement 1 is CORRECT: Rare earth elements are indeed essential for various industries, including electronics, renewable energy, and defense. Statement 2 is INCORRECT: The budget proposes to provide customs duty EXEMPTIONS, not impose duties, to encourage domestic production. Statement 3 is CORRECT: China is a dominant player in the global rare earth elements market.

2. In the context of India's efforts to reduce reliance on China for critical minerals, consider the following statements: 1. The government aims to strengthen supply chain resilience by incentivizing local production. 2. The initiative aligns with broader efforts to promote self-reliance in key sectors under the 'Atmanirbhar Bharat' campaign. 3. The Mines and Minerals (Development and Regulation) Act, 1957, provides the legal framework for regulating the mining sector in India. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.1 and 3 only
  • C.2 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: D

All three statements are correct. The government is indeed incentivizing local production to strengthen supply chains (Statement 1). This aligns with the Atmanirbhar Bharat campaign (Statement 2). The Mines and Minerals (Development and Regulation) Act, 1957, is the primary law governing the mining sector (Statement 3).

3. Which of the following sectors is/are likely to benefit most from the customs duty exemptions on rare earth elements and critical minerals announced in Budget 2026? 1. Electronics manufacturing 2. Renewable energy 3. Agriculture Select the correct answer using the code given below:

  • A.1 only
  • B.2 only
  • C.1 and 2 only
  • D.1, 2 and 3
Show Answer

Answer: C

Electronics manufacturing and renewable energy sectors are highly dependent on rare earth elements and critical minerals. Agriculture is less directly dependent on these materials. Therefore, options 1 and 2 are correct.

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