The Atomic Energy Act of 1962: How a 60-Year-Old Law Left India Defenseless in the Global Tech Race

India's ambition to become a global tech and manufacturing titan is up against a formidable challenge. It is neither a rival nation nor a market competitor, but something much deeper—its own legal framework. The crisis surrounding rare earth elements (REEs)—minerals essential to everything from iPhones to fighter jets—can be traced back to a single piece of legislation written when the geopolitical landscape was entirely different.

India possesses significant geological potential; the country’s coastlines are estimated to hold approximately 7 percent of global rare earth reserves. Despite this potential, India remains a marginal player in the international market, largely relegated to observing China’s strategic dominance. China, which controls nearly 90% of the world's processing capacity, currently dictates the rules of the global tech game.

What has been the primary bottleneck for India? The answer lies in the law.

The Atomic Energy Act of 1962: The Golden Handcuffs

The Atomic Energy Act of 1962 is the central piece of this puzzle. The legislation was originally intended to secure India's nuclear program. Within the coastal sands where rare earths are extracted lies thorium, an element used as a power source for nuclear reactors. To protect this strategic resource, the 1962 Act, under Section 2(g), classified monazite—the primary ore for rare earths—as a "prescribed substance."

This classification placed the entire industry under the direct control of the Department of Atomic Energy (DAE). Consequently, for decades, only the state-owned Indian Rare Earths Limited (IREL) was permitted to operate in these mineral-rich areas, as private entities were legally prohibited from mining or processing them under the restrictive provisions of Section 3 of the Act.

This national security focus had a tragic side effect: it effectively stifled a multi-billion dollar industry. While China was leveraging its legal system—specifically through the 2024 Regulations on the Management of Rare Earths—to promote mining and create a global monopoly, India’s laws functioned as a "Do Not Touch" sign. It is a classic example of how an outdated law can transform into a strategic vulnerability.

The IREL monopoly created a deep technological and commercial void. With no competition, there was little incentive for innovation in extraction and processing. While Chinese firms were patenting advanced methods for separating the 17 rare earth elements, India’s capabilities remained static. This lack of a private ecosystem meant that no specialized workforce was developed, no domestic supply chain for processing chemicals was established, and no risk-taking capital was deployed. The economic cost is staggering; the global rare earth market is projected to be worth over $15 billion by the end of the decade, a figure India has been almost entirely locked out of.

The Anatomy of a Missed Opportunity

Extracting rare earths is a highly complex, multi-stage metallurgical process. It begins with physical separation—IREL’s primary focus—but requires chemical 'cracking' and solvent extraction to separate elements into high-purity oxides. This final, value-adding stage is where China dominates. By legally fencing off the raw material, India prevented the emergence of companies that would have invested in downstream processing. India legally mandated itself to remain a supplier of low-value ore, while China built an insurmountable lead in high-value refining. This was not a market failure; it was a failure of legal imagination.

International Law and Geopolitical Hardball

To diminish its reliance on the U.S., China has proposed supplying rare earths to India. However, this is not a straightforward commercial transaction; it is a move steeped in the grey areas of international trade law. The requirement from China—that the goods should not be re-exported to a third country—is a strategic export control. While not explicitly violating World Trade Organization (WTO) rules, it is a power play that forces India to decide which side of a global economic conflict it will support, trapping it between its trade commitments and resource dependency.

This geopolitical game unfolds as the world seeks to de-risk from Chinese dominance. Through the Minerals Security Partnership (MSP), the U.S., EU, and Japan are building alternative supply chains. India, a member of the Quad, is a key player in this realignment, yet its domestic legal paralysis—specifically the legacy of the 1962 Act—prevents it from contributing its monazite reserves meaningfully.

The Legal Path Forward: A Regulatory Overhaul

India has to take a legal rather than a geological route if it is to get out of this predicament. The government needs to untangle the complex web of laws that have hindered the sector. This entails a multifaceted legal offensive:

• Amend the Atomic Energy Act: The single most important move is to legally differentiate thorium for nuclear energy and monazite for the extraction of rare earths. The law must be changed so that the private sector is allowed to mine and process these materials under regulated conditions.

• Efficient Environmental Clearances: India requires a "single-window" legal system for critical minerals to bypass the current labyrinth of environmental disputes and land acquisition delays. This must balance speed with ecological responsibility through legally-binding approval timelines.

• Develop New PPP Models: The government should establish legal entities where private sector expertise and capital collaborate with IREL. This requires new corporate laws and contracts that safeguard both private investment and national interests through modern Public-Private Partnership (PPP) models.

• Using Law as a Motivator: The Production-Linked Incentive (PLI) schemes initiated by the government are legal means through which companies can be lured into setting up refining units. The legal framework for these schemes should be tailored for the high-capital, high-risk nature of mineral processing.

  
  

Crafting a Modern Legal Architecture

Beyond these individual steps, India needs a new, overarching legal architecture for critical minerals. This requires establishing a single nodal agency, a "National Critical Minerals Authority," with the legal mandate to coordinate between the often-siloed Ministry of Mines, Ministry of Environment, and the DAE.

Legal predictability is the bedrock of long-term, high-risk capital investment. This authority could also be empowered to negotiate international technology-transfer agreements, using access to Indian reserves as leverage to acquire the processing know-how it currently lacks. Such a framework would signal to the world that India is not just open for business, but a serious partner for building the supply chains of the future.

Conclusion

Unless India alters the legislation of bygone days, her destiny will be restricted by the law. The rare earth crisis is a loud wake-up call, that in the 21^st  century, the power of a country is not only determined by the army and the economy, but also the speed and precociousness of legislatures. The fight of sovereignty in technologies is fought equally in the parliamentary debates and the law writing offices as in factories and laboratories. In its time the Atomic Energy Act of 1962 was a cockpit; now it is a cage. India has to focus on legislative agility to guarantee its future.

It is not only the road of deregulation though, but of a complex balance in regulations. Most recent measures, including the Mines and Minerals (Development and Regulation) Amendment Act, 2023, which removed six important minerals (lithium and titanium) on the list of atomic minerals, is a crucial first step towards liberalization. However, these reforms should be more fundamental to systematically solve the baggage of the monozite monopoly of the Department of Atomic Energy. Devoid of a concerted movement to make the Acts of the year 1962 largely compatible with the contemporary industrial demands, the haphazard amendments will not be able to lure the gigantic commercial investments to high-purity refining.

In addition to that, the legal evolution of India has now become a prerequisite of its success in such international partnerships as Minerals Security Partnership (MSP). Although India is welcome in such high-stakes tables as an ally, its internal legal environment does not allow it to be a viable alternative to Chinese supply chain at the moment. The modernization of Indian law can be used to turn India into a nation as resource endowed on paper to a global processing centre in practice in order to close the divide between its geological potential and its expected manufacturing targets of Make in India.

Finally, the issue of the rare earth can be seen as a small-scale model of a larger problem: the necessity to perceive law not as a stagnant obstacle, but as a moving mechanism of technological advancement. It will be the country that is able to update its laws as rapidly as its laboratories that will win the battle of technological sovereignty in semiconductors, green energy, and aerospace fields. B busting the golden handcuffs of the 1962 Act is not only a policy advisory but also a strategic imperative to the survival of India in the hyper-competitive 21^st  century techno global race.