Seeking Pole Position In Rare Earth Magnet Sector, India Plans Rs 3,500 Cr To Rs 5,000 Cr Scheme

Last Updated:June 20, 2025, 18:52 IST

This strategic initiative responds to China's recent decision in April 2025 to tighten export rules on rare earth materials and magnet products, disrupting global supply chains

Rare earth minerals are crucial for modern technology and green energy. (Representational image/News18 Hindi)

India is poised to launch a substantial scheme valued between Rs 3,500 crore and Rs 5,000 crore, aimed at significantly boosting domestic production of rare earth minerals and the essential magnets derived from them, according to reports. This strategic initiative responds to China’s recent decision in April 2025 to tighten export rules on rare earth materials and magnet products, which has disrupted global supply chains. These new restrictions have caused bottlenecks in vital sectors in India, the US, and Europe, particularly affecting the automotive and technology industries that heavily depend on these specialised magnets.

Despite possessing an estimated 6.9 million metric tonnes of rare earth reserves, ranking fifth globally, India has historically lacked a strong manufacturing base for rare earth magnets. Data from the fiscal year ending March 2025 underscores this dependency, with India importing 53,748 metric tonnes of these magnets, mainly from China. This heavy reliance has become a strategic vulnerability, particularly as Chinese rare earth product exports dropped by 61 per cent in May 2025 compared to the same month last year, hitting a five-year low.

The proposed scheme, which may receive formal approval within the next fortnight, aims to incentivise local production of these critical minerals and neodymium-based magnets in particular, says the Economic Times. At least five leading Indian companies have shown early interest in participating in this initiative. The government plans to implement the scheme through a reverse auction model to allocate incentives, encouraging competitive pricing and promoting production efficiency within the domestic industry. This approach is expected to bridge the price gap between local output and typically lower-cost Chinese imports.

In addition to financial incentives, the government is considering other supportive measures, including potential tariff exemptions for machinery used in rare earth processing and magnet manufacturing. Regulatory adjustments under the Mines and Minerals (Development and Regulation) Act are also being explored to streamline the process for domestic production.

This move follows a comprehensive ministerial-level assessment that highlighted the urgent need for India to secure alternative supply sources for these crucial materials. Indian automobile manufacturers, facing potential production cuts by July due to the supply crunch, have been vocal in urging the government for timely support. The long-term goal is clear: to establish India as a significant rare earth magnet manufacturing hub and reduce China’s dominance in this critical segment of the global supply chain.

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