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Critical mineral: Union Budget exempts custom duty on capital goods for RE minerals push, boost exploration

In addition to government funding, central public sector undertakings (PSUs) are expected to invest Rs 18,000 crore under the mission.

3 min readNew DelhiUpdated: Feb 1, 2026 08:59 PM IST

China controls 90% of global critical mineral processing and has imposed curbs on several critical and heavy rare earth minerals amid trade tensions with the US. (Source: File)

The Union Budget 2026-27 has exempted basic customs duty on the import of capital goods required for the processing of critical minerals. The move is expected to boost the country’s critical mineral processing capacity, which is currently in early stages. Processing is considered as one of the key bottlenecks in India’s critical mineral ecosystem as India depends heavily on imports of refined minerals and components.

Notably, China controls 90% of global critical mineral processing and has imposed curbs on several critical and heavy rare earth minerals amid trade tensions with the US. While Beijing has eased some controls after discussions between US President Donald Trump and Chinese President Xi Jinping, the prolonged restrictions have already pushed countries — including India — to diversify supplies.

Rajib Maitra, Partner, Deloitte India, said that the proposed basic customs duty exemption on capital goods for critical minerals processing will enhance the viability of projects and encourage investments in domestic processing. It provides the necessary fiscal incentives and regulatory clarity in reducing import dependence and supporting emerging sectors such as electric mobility, renewable energy, and advanced manufacturing,” Maitra added.

“Minerals processing is highly capital intensive and often equipments are imported. Reduction in customs duty reduces the overall project costs and increases project competitiveness,” Rishabh Jain, Fellow, Council on Energy, Environment and Water (CEEW) said.

The Budget also emphasised on incentivising the prospecting and exploration of critical minerals. It, thus, proposed that certain critical minerals would be included in the list of minerals in Schedule XII of the Income Tax Act. This will make the expenditure incurred on prospecting and exploration of these minerals eligible for a tax deduction and reduce the financial burden on mining companies during the high-risk phase of exploring new mineral deposits.

“India has a target of 1200 mineral exploration projects by FY 31. Now Expenditure on prospecting and exploring of a few critical minerals is eligible for tax deductions. This reduces the financial burden since the probability of funding minerals during exploration activities is very very low,” Jain of CEEW told The Indian Express.

India has been trying to reduce its import dependence on critical minerals as the government’s push for large-scale renewable energy expansion and EV adoption is expected to sharply increase demand for these minerals. Currently, India is 100% import-dependent for some key critical minerals such as cobalt, lithium, nickel, rare earth elements (REEs) and silicon, considered crucial for batteries, solar, semiconductors and advanced electronics.

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In January 2025, the government launched National Critical Mineral Mission (NCMM) with an envisaged outlay of Rs 34,300 crore over seven years. NCMM seeks to secure the entire critical minerals supply chain — from domestic exploration and mining to processing, recycling and overseas acquisition.

In addition to government funding, central public sector undertakings (PSUs) are expected to invest Rs 18,000 crore under the mission. India identified 30 minerals as “critical” and has also amended the MMDR Act to empower the Centre to exclusively auction strategic minerals such as lithium, cobalt and rare earth elements. The government has also rationalised and approved new royalty rates for mining of 24 critical and strategic minerals, to encourage both mining and private sector participation.