China produces over 60 percent and refines over 90 percent of all rare earth elements (REEs). Although REEs are not rare in nature, the processing of REEs is concentrated in China, creating supply chain risks. REEs are crucial for various technologies, including advanced magnets, wind turbines, batteries, and drones. India has one of the world’s largest REE reserves, as well as existing processing capabilities that can be further developed. By cooperating on beach sand mining (BSM) and processing, the United States and India can reduce their reliance on China, supporting both countries’ strategic goals. This can benefit both countries’ REE supply chains. The collaboration should focus on two areas: developing private processing and strengthening environmental, social, and governance (ESG) frameworks.
Beach Sand Mining & Nuclear Energy
India has rich sand deposits containing monazite, which includes thorium and light REEs such as neodymium, praseodymium, dysprosium, and terbium. Given the presence of thorium, which is a nuclear fuel, and India’s pursuit of thorium-based nuclear energy, the government regulates sand mining, allowing limited private participation and exports. The public sector undertaking “Indian Rare Earths Limited” (IREL) leads thorium extraction with limited REE production but has recently refocused on REEs. IREL plans to triple its REE production by 2032.
The United States seeks to diversify its REE supply chain from China. India on the other hand, has limited REE processing capabilities, but can move up the value chain if it invests in advanced processing. This presents a significant opportunity.
Developing Private Processing Facilities
The presence of thorium in India’s beach sand means IREL, and sand mining, is regulated by the Department of Atomic Energy (DAE). Private companies were previously involved in BSM, but amid concerns over illegal mining, in 2016, the Ministry of Mines introduced the concept of permissible “threshold value” of monazite from mined materials through the Atomic Mineral Concession Rules 2016. The rules were amended in 2019, reducing the threshold value of monazite to 0.00 percent, effectively banning private BSM. The government has been considering re-introducing privatization for BSM but this, however, faces ESG concerns.
As a de facto monopolist until then, IREL operates several BSM projects. These projects produce thorium, and REEs—primarily REE oxides, which are lower in supply chain value. Facilitated by a Track 1 memorandum, IREL has partnered with Japan’s Toyota Tsusho Corporation. Toyota has set up an advanced processing plant in Andhra Pradesh which has processed REEs since 2013. The processed materials are exported to Japan, which sought alternatives after China temporarily curtailed REE exports in 2010.
With IREL planning to triple its output by 2032, the United States has an opportunity to secure strategic REE supply chains by supporting processing in India. India stands to gain by getting processing for its extracted REEs and moving up in the supply value chain.
The United States can support an American company in forming a similar partnership as Toyota through a Track 1 agreement. Currently, the United States is diversifying its REE supply chains by making investments in companies like MP Materials. Since IREL is an Indian government company and has no Chinese shareholding, it can be a significant strategic partner.
The U.S. government should provide financial support to interested companies through organizations such as the Development Finance Corporation (DFC) to derisk and enable market entry. A critical minerals agreement (CMA) with India would ensure that processing companies can supply the United States with products compliant under the Inflation Reduction Act (IRA).
Environmental, Social, and Governance Mechanisms
If done improperly, BSM can have ESG implications, including habitat destruction and illegal mining. This is what led to outlawing of private BSM in the first place. Cognizant of this, the government has introduced several measures such as the “Sand Mining Framework,” “Coastal Regulation Zone” regulations, and penalties.
The United States can support India by sharing technology and expertise, such as real-time environmental monitoring systems inspired by those employed by the U.S. Environmental Protection Agency (EPA). This collaboration can ensure that India’s mining practices align with global standards.
The United States can also assist India in developing comprehensive frameworks like the National Environmental Policy Act (NEPA), which mandates detailed environmental impact assessments. These frameworks can include stricter regulations to curb illegal mining and enhance supply chain transparency and promote sustainable extraction.
Additionally, joint ventures can introduce cleaner technologies like those encouraged under the U.S. Clean Air Act, reducing emissions and waste. U.S. models of community engagement and corporate social responsibility, like the “Community Right-to-Know” provisions of the Emergency Planning and Community Right-to-Know Act (EPCRA), can ensure community development. This includes strengthening India’s Districts Minerals Foundations frameworks to support healthcare, education, and infrastructure.
Beach sand mining offers an opportunity for the United States and India to strengthen their partnership. By developing private processing facilities and enhancing ESG frameworks, the United States and India can secure critical REE supplies.
Akshat Singh is a research associate with the Chair in U.S.-India Policy Studies at the Center for Strategic and International Studies (CSIS).
