Executive Summary
India's Union Budget 2026-27 eliminated customs duty on 36 critical minerals — including lithium (5%→0%), cobalt (5%→0%), gallium (7.5%→0%), and rare earths (2.5-5%→0%) — creating a zero-duty input corridor for technology manufacturing. EFTA firms like ABB, Bühler, and Equinor can now import raw minerals to India duty-free, manufacture at 40-60% lower cost than Europe, and export finished goods to the EU at 0% duty under the India-EU FTA. This three-step value chain makes India the most cost-competitive manufacturing base for EV batteries, semiconductors, and renewable energy equipment destined for the European market.
February 2026 — Budget Analysis
BCD changes effective from Union Budget 2026-27 (February 1, 2026). Sources: indiabudget.gov.in, CBIC, PIB.
The removal of Basic Customs Duty (BCD) on 36 critical minerals — including lithium, cobalt, rare earths, gallium, and germanium — is one of the most consequential changes in India's Union Budget 2026-27. Combined with the India-EU FTA's zero-duty export access and EFTA-India TEPA investment commitments, it creates a powerful incentive for European technology firms to establish manufacturing operations in India.
The 36 Critical Minerals: BCD Changes
| Mineral | Previous BCD | Budget 2026 BCD | Key Application |
|---|---|---|---|
| Lithium | 5% | 0% | EV batteries, energy storage |
| Cobalt | 5% | 0% | Battery cathodes, superalloys |
| Rare Earths (17 elements) | 2.5–5% | 0% | Magnets, semiconductors, wind turbines |
| Gallium | 7.5% | 0% | Semiconductors, LEDs, solar cells |
| Germanium | 7.5% | 0% | Fibre optics, infrared optics |
| Graphite (natural) | 5% | 0% | Battery anodes, lubricants |
Why This Matters for EFTA Tech Firms
The zero-duty critical minerals regime creates a three-step value chain that EFTA tech firms can exploit:
Import raw minerals to India at 0% BCD
Lithium from Australia, cobalt from DRC, rare earths from China — all duty-free into Indian manufacturing facilities
Manufacture in India with lower labour and energy costs
India's manufacturing cost advantage (40-60% lower than Europe) is now amplified by zero-duty input costs
Export finished goods to EU at 0% duty under FTA
The India-EU FTA eliminates 99.5% of EU tariff lines — so finished products (batteries, electronics, solar panels) enter Europe duty-free via eufta.in's Rotterdam hub
EFTA Companies Already Moving
- ABB (Switzerland): Expanding robotics and automation manufacturing in Bangalore. Zero-duty rare earth imports reduce motor production costs by an estimated 8-12%.
- Bühler Group (Switzerland): Food processing technology plant in Pune. Uses germanium-based optical sorting systems — now duty-free.
- Equinor (Norway): Solar panel assembly JV in Gujarat leveraging duty-free gallium and silicon imports for photovoltaic cells.
- Marel (Iceland): Food processing equipment manufacturing using duty-free cobalt-alloy components.
Rules of Origin: The Key Requirement
To export finished goods from India to the EU at 0% FTA duty, products must meet Rules of Origin requirements — typically 40-50% local value addition or a Change in Tariff Heading (CTH). The zero-duty mineral imports do not count as Indian origin, but the manufacturing value addition (labour, energy, other components) does. EFTA firms should structure their Indian operations to ensure sufficient domestic value addition for FTA qualification.
Official Sources
- India Budget 2026-27 — Full customs duty schedule
- CBIC — Updated BCD notification for critical minerals
- Ministry of Mines, India — Critical minerals list and policy
- EFTA Secretariat — TEPA investment chapter
- DG Trade — India-EU FTA Rules of Origin