Fertilisers, rare earths, and tunnel boring machines: Read how China lifting curbs is a pro-India move as both nations try for better relations
Donald Trump, the President of the United States, has been attacking India over purchasing Russian oil, though US keeps trading with Russia. Putting additional tariffs and even openly declaring the tariffs as ‘sanctions’, the current White House administration is hell bent on antagonising India.
While Trump continues to make outrageous statements and unsuccessfully attempts to pressure India, the Modi government is deepening its relationship with Russia and repairing its ties with the historical adversary, China. Notably, China had also been involved in a tariff battle with the US president previously.
Trump’s attempt to bully India are also demonstrating favorable results for the country, as in a notable development, China has announced the removal of restrictions on the export of fertilisers, rare earth magnets/minerals and tunnel boring machines to India, reported The Economic Times. These three demands were presented to Chinese Foreign Minister Wang Yi by External Affairs Minister Dr S Jaishankar during a meeting between the two, during last month.
On 18th August, Yi, who is on a two-day visit to India, conveyed to his Indian counterpart that China had already begun to address Indian requests over these three issues. According to those with knowledge of the specifics, shipments have already started on the Indian end. India and China also reached an agreement to sustain the progress of their bilateral relations following discussions between Wang Yi and Dr. S Jaishankar.
The availability of di-ammonium phosphate during the Rabi season was directly affected by abrupt fertiliser restrictions, which India had brought to China’s attention. Shipments of tunnel boring machines, including those made by multinational companies in their China-based facilities, were earlier halted by China en route to important infrastructure projects in India.
Chinese limitations on rare earth magnets and minerals have raised serious concerns in the electronics and automotive industries, resulting in shortages that might severely hinder output. However, the fresh developments took place as Beijing and New Delhi agreed to progressively normalise their relationship.
How rare earth mineral restrictions shocked auto industry
According to the International Energy Agency, China produces 92 per cent of the world’s refined output and more than 60 per cent of rare earth mining, owing to large state subsidies and lax environmental regulations. Beijing had been requiring Chinese enterprises to seek a licence before exporting these minerals, including rare earth magnets, to any country since April.
The world auto industry was rocked when Beijing which has a near monopoly on the production of rare earth elements used them as a major weapon in its now-over trade dispute with Washington. Seven of the seventeen rare earth elements (REEs), samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium were subjected to export limitations. Rare earth magnets are essential for the production of automobiles.
India with the third largest automobile industry in the world was also targeted despite having significant rare earth reserves, particularly in areas like Andhra Pradesh and Odisha as its capabilities for extraction, separation and refinement continue to lack. China has a near monopoly in the processing stage, which uses sophisticated, expensive, and environmentally hazardous techniques that India has not yet been able to develop.
The import of rare earth magnets into India had been suspended. The importers had to endure a laborious 40-45 day procurement procedure that involved paperwork, authentication by the Directorate General of Foreign Trade and submission to China’s Ministry of Commerce (MOFCOM), exporters, and the Chinese Embassy in New Delhi.
The automakers struggled to maintain manufacturing lines as their rare earth magnet supplies started running low. Delays in their delivery could have adversely affected the electric two-wheeler industry and resulted in inflation. Ravi Bhatia, president and director of JATO Dynamics India, anticipated a price hike of 5-8% and a manufacturing delay of two to six months, according to a report in Mint.
The problem is that rare earth magnets are required for motors, power steering, windscreen wipers and other components in even ICE (Internal Combustion Engine) cars. India has been totally dependent on China to meet its expected 6,000 to 7,500 tonne yearly demand for rare earth magnets in the electric car sector.
This worried the Indian auto industry, especially the producers of electric vehicles, since assembly lines could stop if even one component is absent. Leading domestic automakers and industry associations such as the Automotive Component Manufacturers Association and the Society of Indian Automobile Manufacturers cautioned that if the license requirements continued, output could be negatively affected.
Numerous Indian automakers obtained authentication from the Chinese Embassy out of more than 30 applications, nevertheless, despite outreach by the Indian Embassy in China, no firm was approved by China’s MOFCOM approximately 11 weeks after the limitations went into effect.
As Union Commerce Minister Piyush Goyal voiced “hope” that China would authorise exports soon, India which obtained 93% of its REEs from China in 2024-25, suspended a 13-year REE export agreement with Japan in order to protect domestic supply.
Recycling e-waste presents a viable domestic solution to recover essential minerals. However, India now recycles barely 22 per cent of its 62 million tonne of yearly e-waste. The ambitious national incentive program for recycling essential minerals which has been allocated 1,500 crore remains in final phases of development and could take years to be completed.
Furthermore, there are currently very few startups and institutions in India’s technology ecosystem working on motors and rare earth-free technologies. The monthly motor output of those with active manufacturing only meets a small portion of the needs of the car industry while the majority are still in the research and development alongside planning stages.
Importing REEs from China was clearly more difficult for Indian automakers than for those in the United States and Europe. India enhanced its domestic strategies under the National Critical Mineral Mission to decrease dependency on imports and create long-term resilience in critical mineral supply chains.
Nevertheless, it would have required an extensive duration for these plans to come to fruition as the automobile sector would have had to deal with the consequences of China’s decision.
India faced fertiliser crunch after China halted the export
China is a crucial supplier of vital inputs like water-soluble fertilisers (WSFs) for India’s agriculture specifically horticulture. Crops like pomegranates, bananas, grapes and other fruit depend on these fertilisers. However, India’s agricultural industry faced serious difficulties as a result of China’s ban on fertiliser exports particularly with regard to speciality fertilisers and essential nutrients like urea and di-ammonium phosphate (DAP).
China, a major provider of agricultural inputs worldwide, stopped granting export permits for DAP since the middle of 2023 and cut off the flow of speciality fertilisers to India completely in recent months but supplies to other countries persisted. This sudden interruption affected Indian farmers before the critical kharif or monsoon planting season and caused a steep drop in world supply and drove prices upward.
China used the Customs Inspection Quarantine (CIO) to halt or limit the export of agrochemicals and fertilisers. Its Mono Ammonium Phosphate (MAP) imports fell by more than 80% between 2023 and 2024. Indian manufacturers reported that they had trouble obtaining approval to acquire materials from there. The excessive reliance on some Chinese chemicals and herbicides resulted in their prohibition or inquiry.
India imports an extensive quantity of fertilisers especially DAP and nitrogen-based chemicals like urea. The nation produced very little of its own speciality fertilisers due to technological constraints and traditionally limited demand.
India’s DAP opening inventories on 1st June were only 12.4 lakh tonnes, a substantial decline from 21.6 lakh tonnes in 2024 and 33.2 lakh tonnes in 2023 to zero in 2025. This raised concerns regarding crop yields and sowing efficiency.
A third of the agricultural GDP comes from horticulture in India. Crops that depend on exports such as tomatoes, bananas and grapes are also susceptible to the quality of their inputs. Moreover, uncertainty and high input costs make India less competitive internationally in exporting fruits and vegetables.
On the other hand, Indian fertiliser policies are reportedly biased towards bulk urea rather than speciality inputs required for high-value horticulture. The speciality fertilisers market was especially hard hit by the move.
The yield of high-value crops including fruits and vegetables, soil health and nutrient absorption are all improved by these water-soluble fertilisers, micronutrients, nano and biostimulant varieties. Although these fertilisers are more technologically sophisticated and not subsidised, India generally imported approximately 150,000 and 160,000 tonnes between June and December.
China had historically been able to provide about 80% of this demand. A total cease, however, disturbed this balance and substitute sourcing from nations like Saudi Arabia, Morocco, Russia and Jordan proved unable to cover the deficit.
The abrupt supply stifling of the global phosphate markets triggered restrictions. The price of imported DAP increased from $515 to $525 per tonne in mid-2024 to over $810 in mid-2025. When prices reached this point, profit margins of fertiliser producers were squeezed and subsidy bills of governments grew as a result of capping fertiliser retail prices to protect farmers.
The availability of phosphoric acid was limited which resulted in production bottlenecks in India’s expanded DAP output. The cost of this crucial input was also rising as parties attempted to bargain over the price. The option of integrating upstream and investing in local phosphate deposits was required due to the subject industry’s dependence on foreign raw materials.
Tunnel Boring Machines encouter Chinese wall
There were worries that India’s flagship bullet train project could be delayed as three enormous tunnel boring machines intended for the Mumbai-Ahmedabad high-speed rail link had been stalled at a Chinese port, including the biggest which was constructed for utilization in the country.
These were constructed in Guangzhou by German tunnelling expert Herrenknecht and are crucial to the 21 kilometer subterranean portion of the route from Bandra-Kurla Complex (BKC) to Shilphata. One was supposed to arrive earlier this year while the other two were scheduled by October 2024.
However, the Chinese port authorities did not grant any clearance. The reason for the delay was not formally explained either. Diplomatic channels were used because the holdup affected not only the TBMs but also other components essential for civic works.
An official pointed out, “The equipment includes not just the TBMs but also parts critical for other infrastructure works.” According to sources, a prolonged delay could have a major impact on development, especially on the underwater section beneath Thane Creek.
The ₹1.08 lakh crore project has been carried out by the National High-Speed Rail Corporation Ltd (NHSRCL) which intended to employ TBM-1 and TBM-2 for digging between Sawli (Ghansoli) and BKC as well as TBM-3 between Vikhroli and Sawli. The 7 kilometer section of the route that ran beneath Thane Creek is India’s first underwater rail tunnel and among the corridor’s most technically challenging parts.
India’s imports of self-propelled TBMs rose significantly in 2021 and 2022 with the majority coming from outside of China. However, India was nearly entirely dependent on China in 2019 in terms of both value and volume of standard TBMs.
Fostering ties at critical time
The restoration of ties between the elephant and the dragon has occurred at a pivotal moment when the United States has been firmly focused on opposing India. It even provided absurd justifications for its aggression against India for acquiring Russian oil while being permissive towards China for engaging in similar actions.
US Secretary of State Marco Rubio while acknowledging the hypocrisy shamelessly defended, “Well, if you look at the oil that’s going to China and being refined, a lot of that is then being sold back into Europe. Europe is also buying natural gas still. Now, there are countries trying to wean themselves off it, but there’s more Europe can do with regard to their own sanctions.”
Meanwhile, Wang Yi’s arrival in India and his meeting with Prime Minister Narendra Modi as well as other top officials prompted a stir in international diplomatic circles and undoubtedly in Washington as well. The visit has been characterized by the reopening of channels where interests intersected but caution was still exercised.
Trump’s policy did not manage to compel an ally like India into submission, instead, facilitated a thaw in relations with its enemies. The decision to prioritize a terror state like Pakistan to provoke India has ultimately backfired for the United States. On the other hand, it has played a key role in improving the previously strained relations between the world’s second-largest economy and the soon-to be third largest economy globally.
The talks between the two sides even extended beyond supply chains. The restoration of border trade, the easing of visa requirements and the resumption of direct flights, all halted since the 2020 Galwan clashes were also discussed without any compromise on its sovereignty by New Delhi. The issues have not been settled and there is a significant amount of distrust that can only be changed over time in light of China’s actions, however, it is certainly a step forward in that direction.
Trump hopefully gained insight into what a multipolar world resembles owing to the meeting, as Washington desperately seeks to cling to the fading concept of a unipolar world where the US dictates all decisions and sovereign nations are compelled to adhere. It is essential for Western powers to recognize that nations like India cannot be subjected to dictation but rather treated as equals, entitled to defend their interests, if the latter desire to maintain friendly relations with it.
Conclusion
India is now skillfully managing risks by wisely accepting economic concessions that boosts progress while firmly upholding its sovereignty and strategic autonomy. It has exhibited confidence and assertiveness with its diplomatic strategies being designed for a larger arena that included Washington.
While Trump might continue to seethe and lash out from his Oval Office or praise the de facto leaders of Pakistan and even announce yet another project with Islamabad, New Delhi has already made it clear that it has carved out a path of self-interest and sovereignty for itself and will not succumb to any pressure, regardless of their tariffs or underhanded tactics.
The enduring warm relations with Russia coupled with the recent series of meetings involving officials from India and China affirm the same.
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