Why India’s Lone Rare Earth Miner IREL Isn’t Helping Domestic Automakers

Chinese export restrictions on rare earth metals, key components for EVs and modern cars, has pushed Indian state owned producer of these metal IREL (formally called Indian Rare Earths Ltd) into the spotlight. The Miniratna PSU, which has been the sole miner of rare earth elements in India, has been facing issues such as low processing capacity, domestic demand and a lack of permanent leadership since the last few months.

All of these issues have come into the light, as the Indian automotive industry looks for alternative supply of rare earth metals like samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. These are used to produce Rare Earth Magnets (REMs) like neodymium iron boron (NdFeB) and samarium–cobalt (SmCo) magnets. India has 6.9 million metric tons of rare earth metal reserves but there is no domestic magnet production. Meanwhile, China accounts for over 90% of global processing of rare earth elements, effectively controlling the entire supply chain.

Indian auto makers like Maruti Suzuki, Tata Motors, Bajaj Auto and other giants in the Indian auto industry rely on Chinese supply of rare earth metals to produce EVs and other car components. In the FY25 ending March 2025, India imported 53,748 metric tons of rare earth magnets. But in April 2025, China imposed export restrictions on seven rare earth elements and finished magnets, mandating export licences. The revised framework demands detailed end-use disclosures and client declarations, including confirmation that the products will not be used in defence or re-exported to the US. By end-May 2025, nearly 30 import requests from Indian companies were endorsed by the Indian government, but none have yet been approved by the Chinese authorities, and no shipments have arrived.

Reports now say the Indian government was looking to reduce import dependency and build local production capacity and invest in recycling infrastructure. Fast-tracking these plans will depend on one company – IREL.

IREL - Sole REE Miner

Till now, only IREL has the capabilities to mine the rare earth elements in India. Why? For a long time, India restricted rare earth mining under the Atomic Energy Act, allowing only IREL, under the Department of Atomic Energy, to mine such metal. The firm was set up in 1950s to produce nuclear fuel for India's domestic use.

India finally allowed private players to explore and potentially mine rare earth metals through amendments to the Mines and Minerals (Development and Regulation) Act, 2023. This amendment, which came into force on August 17, 2023, allows for the auctioning of exploration licenses and mining leases for these minerals, including lithium, niobium, and rare earth elements (REEs).

Finally, in March 2025, 13 exploration licence blocks, including for rare earth elements, were put up for auction under a new liberalised regime. These auctions reportedly attracted interest from over two dozen companies, but actual production from these blocks will take time.

Meanwhile, IREL achieved its highest ever mineral production capacity of 531,000 ton in financial year 2023-24 (FY24). Its FY25 annual report is still pending.

However, the outlook the firm provided for the last financial year was also quite grim.

Issues IREL faces

"While IREL is geared up to meet the raw material requirement for meeting the global commitment of the Country for reducing and subsequently eliminating the carbon footprint, the mid-stream industries in the Rare Earth sector are yet to take off. Thus, the domestic market for IREL’s products in the said sector is almost non-existent," the Miniratna said in its annual report.

The company's Rare Earth Extraction Plant (REEP) in Orissa Sands Complex (OSCOM) witnessed an appreciable increase of about 9.8 % in production of chemicals in FY24.

However, they noted that "Operations in High Pure Rare Earths Plant in Rare Earths (Refining) Division witnessed a drop of about 9% compared to last fiscal for controlling the increase in inventory because of lack of domestic mid-stream industry in the sector."

Mid‑stream in the rare-earth sector refers to the separation, refining, and processing of rare-earth concentrates into high-purity oxides, metals, or alloys — critical inputs for manufacturing permanent magnets and advanced components. In India so far, there are no major players working in this area.

Earlier this month, The Hindu Business Line reported that Hyderabad-based Midwest Advanced Materials Pvt Ltd (MAM) is set to become one of India’s first companies to begin commercial production of rare earth magnets for EVs, with operations expected to start in about six months. Backed by the Department of Science, MAM will produce Neodymium (NdFeB) magnets—crucial for electric vehicle motors and renewable energy generators—with an initial capacity of 500 tonnes/year, scaling up to 5,000 tonnes by 2030. IREL will supply the raw materials to the company.

"The source of IREL’s Rare Earth vis-à-vis that of the major producing country further makes matters difficult," the annual report said.

Adding that the year 2024-25 will be challenging for IREL looking at the global market conditions.

"The price pressure on virtually the entire product portfolio may have an adverse impact on IREL’s top and bottom line," they further added.

In FY24, the company reported a total revenue of ₹2,264.47 crore, marking a 13.29% increase over the previous year. Profit after tax was ₹1,012.22 crore.

Severing Ties With Japan's Toyota

Now, amid the China crisis, the government reportedly has asked IREL to suspend a 13-year-old export agreement with Toyota Tsusho’s Indian unit to safeguard domestic rare earth supplies, particularly neodymium. In 2024, Toyotsu Rare Earths India exported over 1,000 tonnes of rare earth materials to Japan—about a third of IREL’s total output.

IREL has long exported rare earths due to limited domestic refining capacity, but now aims to retain resources, expand processing, and reduce reliance on China. The company is awaiting clearances for four new mines and plans to scale neodymium production from 450 tonnes in FY26 to 900 tonnes by 2030, as per Reuters.

Although the exports are governed by a bilateral agreement, India hopes to renegotiate terms amicably, recognising Japan as a strategic partner.

No Permanent Chairman Since Dec

Meanwhile, IREL has been without a permanent Chairman and Managing Director since December, when Deependra Singh vacated the post. S.B. Mohanty, the company's director of finance, has taken the interim charge of the office. The Miniratna firm had put out an advertisement inviting applications for the CMD position in February.

This is not a new issue. As of December 2024, nearly 86% of independent director positions in Central Public Sector Enterprises (CPSEs) were lying vacant—a sharp jump from 59% just two months earlier, according to The Economic Times from February.  

The report citing official data said that out of around 750 independent or non-official director posts, 648 were unfilled by the end of December. The surge in vacancies—from 392 in September to 441 in October 2024—was primarily due to the expiry of several directors' terms.