Andhra Pradesh's Rare Earth Strategy, 2025: The Political Economy Of The Critical Minerals

Policy Update

Vishal Kumar

Background

The global transition to clean energy and advanced technology has turned rare earth elements (REEs) into “silent sovereigns” of the 21st-century economy. Modern geoeconomics shows that downstream processing capacity has become a greater source of strategic leverage than resource ownership, with refineries, separation plants and magnet manufacturing playing a central role. China currently commands approximately 90-92% of global refining capacity and nearly 92% of finished component manufacturing.¹

This concentration has created a structural asymmetry often described as the “Value Chain Trap”. Beyond their economic importance, rare earths have become central to the political economy of strategic minerals, where state policies, industrial capabilities and geopolitical competition determine who captures value across global supply chains. Control over extraction, processing and technology increasingly shapes national bargaining power, industrial competitiveness and economic security.

Despite possessing the world’s fourth-largest reserves of REEs, India contributes less than 1% to global mining output. For decades, the development of these resources was constrained by the Atomic Energy Act of 1962, which classified thorium-bearing monazite sands as “prescribed substances”. This effectively granted IREL (India) Limited a state monopoly and discouraged private investment.

Consequently, Andhra Pradesh (AP), despite its mineral-rich coastline known as Ratnagarbha (“womb of minerals”), recorded virtually no beach-sand mineral production for years due to these regulatory constraints.¹¹ A significant policy shift occurred with the Mines and Minerals (Development and Regulation) Amendment Act of 2023, which removed minerals such as lithium and titanium from the “atomic” list, opening the door to greater private participation in exploration and industrial development.⁴

Figure 1 illustrates the spatial distribution of the major industrial hubs underpinning Andhra Pradesh’s emerging rare earth ecosystem.

Figure 1. Major Rare Earth Development Hubs in Andhra Pradesh

Source. Base map adapted from d-maps.com. Annotations by the author based on APMDC, GSI and the Ministry of Mines, Government of India.

Functioning

Andhra Pradesh’s emerging rare earth ecosystem is anchored in a multi-tiered strategic framework led by the National Critical Minerals Mission (NCMM). A major milestone was achieved under the Union Budget 2026–27, which designated the state as one of India’s four Dedicated Rare Earth Corridors (RECs).³ The selection reflects Andhra Pradesh’s substantial rare earth mineral reserves, extensive coastal heavy mineral sand deposits, established port infrastructure and expanding industrial base, all of which make it well suited for large-scale extraction, processing and downstream manufacturing. This designation provides the institutional foundation to accelerate exploration, strengthen domestic processing capacity and attract investment across the rare earth value chain. The state’s strategy is built around the following key operational pillars.

The Integrated Corridor Model: The Rare Earth Corridor (REC) is designed as an integrated end-to-end value chain, unlike traditional mining zones. It combines mining and mineral separation with research and the manufacturing of Rare Earth Permanent Magnets (REPMs).
Public-Private Partnership (PPP): The state has adopted a public-private partnership (PPP) model for rare earth development. Under this arrangement, the Andhra Pradesh Mineral Development Corporation (APMDC) holds the mining leases and supplies feedstock, while private companies undertake downstream value addition and high-purity refining. This structure accommodates the continued regulation of monazite because of its thorium content.
Specialized Industrial Clusters: The state is developing three specialized coastal industrial hubs. These include a Titanium Park at Srikakulam, a Rare Earth Corridor at Anakapalli and an Integrated Titanium and Rare Earth Corridor at Machilipatnam.
Incentive Framework: The ecosystem is supported by the ₹7,280 crore Rare Earth Permanent Magnet (REPM) Manufacturing Scheme. The scheme provides capital subsidies and sales-linked incentives to promote investment in advanced processing facilities.⁶

Performance

Andhra Pradesh has made significant progress in developing its rare earth sector following recent regulatory reforms. The state has accelerated resource mapping, strengthened industrial infrastructure and attracted substantial investor interest. The key performance indicators are discussed below:

Investment Targets: The state government envisages investments exceeding ₹50,000 crore (USD 5.2 billion) in the rare earth and titanium sectors over the next decade. These investments are expected to support the development of integrated mining, processing and value-addition facilities.⁷
Resource Mapping: Extensive geological surveys conducted by the Geological Survey of India (GSI), supported by detailed exploration and mineral resource assessments, have identified 16 critical minerals in commercially significant quantities. These surveys estimate that Andhra Pradesh possesses approximately 211 million tonnes of heavy beach sand minerals and accounts for nearly 30% of India’s monazite reserves. These deposits result from the state’s long coastline, where natural sedimentary processes have concentrated mineral-rich sands over geological timescales, making the region one of India’s most important sources of rare earth-bearing minerals.⁵
Corporate Interest: The state has attracted strong interest from leading domestic industrial groups. Reliance Industries, Adani Group and Vedanta are among ten companies that have formally expressed interest in establishing value-addition facilities in Andhra Pradesh. This reflects growing private-sector confidence in the state’s critical mineral ecosystem.⁹
Production Infrastructure: Indian Rare Earths Limited (IREL) is establishing a 10,000-tonne-per-year monazite processing plant at Gudur in Nellore district. The facility is expected to become a key component of India’s domestic rare earth refining capacity and strengthen downstream value addition.²
Dedicated Industrial Ecosystem: Andhra Pradesh has been identified as one of India’s Dedicated Rare Earth Corridors under the Union Budget 2026–27. This designation is expected to accelerate industrial cluster development, improve logistics infrastructure and attract specialised manufacturing and processing industries.¹²
Research and Technological Capacity: The state has initiated efforts to strengthen research and innovation in mineral processing, separation technologies and advanced materials through collaboration between government agencies, research institutions and industry. These initiatives aim to improve domestic technological capabilities and reduce dependence on imported processing technologies.⁸
Value Chain Development: Policy initiatives increasingly emphasise downstream processing and value addition rather than the export of raw minerals. This approach seeks to develop an integrated rare earth value chain encompassing mining, separation, refining, magnet manufacturing and advanced materials production.¹²
Strategic Partnerships: Andhra Pradesh’s rare earth initiatives complement India’s broader critical mineral strategy by encouraging collaboration with domestic enterprises and international partners. Such partnerships are expected to facilitate technology transfer, strengthen supply chain resilience and enhance India’s position in global critical mineral value chains.²

Impact

The development of the AP rare earth ecosystem is expected to have significant domestic and geoeconomic impacts, which are discussed below: .

Processing Sovereignty: India aims to reduce its 80–90% import dependence on China to nearly 50% within the next five years by transitioning from a raw material exporter to a value-added producer across the rare earth supply chain. Strengthening domestic processing capacity would improve supply security for strategic industries.⁸
Techno-Industrial Leadership: The ecosystem supports India’s Net Zero 2070 goals by providing the high-performance permanent magnets required for electric vehicles, wind turbines and other clean energy technologies. This would also strengthen India’s position in emerging green manufacturing value chains.³
Strategic Self-Reliance: The recovery of titanium and light rare earth elements such as neodymium and praseodymium will support defence manufacturing, aerospace, satellite systems, semiconductor production and other strategically important sectors, reducing dependence on imported critical materials.⁵
Circular Economy Gains: Reprocessing mining tailings and industrial waste, including red mud and fly ash, could unlock an additional ₹5,000 crore in annual economic value through circular extraction technologies. This would improve resource efficiency while reducing environmental waste.¹²
Employment and Industrial Development: The development of integrated mining, processing and manufacturing facilities is expected to generate skilled employment, encourage ancillary industries and strengthen Andhra Pradesh’s industrial base. It would also stimulate investment in specialised logistics, research facilities and advanced manufacturing.¹
Export Competitiveness: Expanding domestic rare earth processing and value addition would enable India to move beyond exporting raw minerals towards exporting higher-value intermediate and finished products. This could enhance export earnings and strengthen India’s participation in global critical mineral value chains.¹
Innovation and Research: The ecosystem is expected to encourage greater collaboration between industry, research institutions and universities in mineral processing, materials science and recycling technologies. Such partnerships would support technological innovation and strengthen India’s long-term competitiveness in critical minerals.¹²
Geoeconomic Influence: A stronger domestic rare earth industry would enhance India’s role in emerging critical mineral partnerships such as the Minerals Security Partnership (MSP) and the Quad’s critical mineral initiatives. This would diversify global supply chains and reinforce India’s position as a trusted supplier in an increasingly competitive geopolitical environment.⁵

Emerging Issues

The political economy of critical minerals remains characterized by several systemic challenges despite recent policy and industrial advancements. The following section discusses these challenges:

The “Tacit Knowledge” Trap: China’s dominance is reinforced by its extensive patent portfolio and accumulated tacit technological knowledge. Unlike codified knowledge contained in patents or technical manuals, tacit knowledge consists of practical skills and production expertise developed through experience, making it difficult for other countries to replicate advanced processing capabilities. China accounts for approximately 50% of global REE-related patent filings. It has also prohibited the export of extraction and separation technologies, limiting the international diffusion of critical processing expertise.¹³
Environmental and Radioactive Risks: Extracting monazite requires the careful management of radioactive thorium and hazardous effluents. Inadequate environmental safeguards could contribute to coastal degradation, trigger community opposition and result in regulatory delays.¹⁴
Technological and Skill Gaps: India currently lacks industrial-scale facilities capable of producing the ultra-high-purity rare earth materials required for advanced electronics. The sector also faces a shortage of skilled personnel with expertise in advanced hydrometallurgical processing and separation technologies.⁷
Resource Nationalism: Global price volatility often prompts greater state intervention in resource-rich countries. Such policy responses may discourage foreign investment if regulatory frameworks are perceived as protectionist or unpredictable.⁹
Global Supply Chain Vulnerabilities: The global rare earth supply chain remains highly concentrated, particularly in mining, refining and processing. Export restrictions, geopolitical tensions and trade disputes can disrupt the availability of critical minerals, increasing price volatility and creating uncertainty for downstream manufacturing industries. Diversifying supply sources and strengthening international partnerships will be necessary to enhance supply chain resilience.⁵
Infrastructure and Processing Constraints: Although Andhra Pradesh possesses substantial rare earth reserves, the development of integrated mining, separation, refining and value-addition facilities remains limited. Inadequate transport infrastructure, specialised processing facilities and industrial clusters may constrain the state’s ability to capture higher value segments of the rare earth supply chain.³
Community Acceptance and Land Acquisition: Large-scale mining and mineral processing projects frequently encounter challenges related to land acquisition, rehabilitation and local community concerns. Ensuring transparent stakeholder consultations, fair compensation and sustainable livelihood opportunities will be essential for maintaining the social legitimacy of future projects.¹¹

Way Forward

A coordinated action strategy is required to transform geological endowments into sustainable industrial capacity. The following policy measures can strengthen Andhra Pradesh’s position in the critical minerals value chain:

Accelerated R&D: Greater emphasis should be placed on the indigenous development of energy-efficient hydrometallurgical processes, including solvent extraction and ion exchange. This would reduce technological dependence and help overcome barriers created by Chinese intellectual property restrictions
Integrated Value Chains: The state should prioritize co-located industrial clusters that integrate mining, mineral processing, magnet manufacturing and downstream industries such as electric vehicles and defence manufacturing. Such integration would improve operational efficiency and reduce logistics costs.
International Friend-shoring: Andhra Pradesh should leverage strategic partnerships, including the Minerals Security Partnership (MSP) and collaborative ventures such as IREUK Titanium Limited. These partnerships can facilitate technology transfer, diversify supply chains and strengthen investment flows.
Strategic Stockpiling: India should establish a responsive stockpiling programme for refined rare earth elements, drawing on the experience of Japan’s JOGMEC model. Such a mechanism would enhance resilience against supply disruptions and global price volatility.
Talent Incubation: The state should expand specialised skill development initiatives, building on programmes such as the India Semiconductor Workforce Development Program. Strengthening the talent pipeline is essential to address shortages in advanced mineral processing and separation technologies.

Andhra Pradesh has the potential to emerge as a strategic hub within the global critical minerals value chain. It can strengthen India’s long-term mineral security and industrial competitiveness by integrating its abundant mineral resources with advanced processing capabilities and downstream manufacturing.

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About the contributor:

Vishal Kumar is a Research & Editorial Intern at IMPRI. He is currently pursuing a master’s degree in Political Science at the University of Jammu, Jammu and Kashmir. His research interests include Political Economy, Public Policy, Governance and Political Philosophy.

Acknowledgement:

The author would like to thank the reviewers and the IMPRI team for the guidance and support.

Reviewed by:

Ameya Satam and Tanvi Nerukar
Disclaimer:

This article is intended for academic purposes only. The views expressed are those of the author and do not necessarily reflect the views of IMPRI or any government institution.