China’s decision to impose restrictions on the export of rare earth elements and related magnets is expected to impact India’s auto and white goods sectors in the short term. However, Commerce Minister Piyush Goyal while speaking in Bern, Switzerland, said that the Indian government is actively exploring alternatives, including diplomatic efforts and the development of new supply chains.
According to Goyal, the Indian embassy is already in discussions with Chinese authorities on the matter, and the commerce ministry is engaged as well.
China currently dominates the global rare earth magnet supply chain, controlling over 90 percent of global processing capacity. These magnets are essential components across sectors like automobiles, household appliances, and renewable energy.
The Chinese government has mandated, from April 4 onwards, that special export licences be required for seven rare earth elements and associated magnets.
“Obviously, there are issues around the stopping of permanent magnets from China to India, which will affect our auto sector, particularly, and several white goods and other sectors….Some companies have put in their applications, and we hope that good sense should prevail and they will get their approvals for permanent magnets,” Goyal told reporters in Bern.
In the longer run, the minister said India is evaluating a range of options to secure alternate supplies of these critical materials.
He said, “In a way, it’s a wake up call for all those who have become over reliant on certain geographies. It’s a wake up call for the whole world that you need trusted partners in your supply chain.”
“Because more and more companies and businesses and people in India will recognise that it is important to be self reliant, it's important to have trusted partners in your supply chains and more and more the world today is wanting India to be in their supply chain today because today we are seeing as a trusted partner,” he added.
When asked if the government is considering a production-linked incentive (PLI) scheme for rare earth materials, Goyal said he has held discussions with major auto companies, who are “very” confident about overcoming the challenge.
“They are in dialogue with our innovators, startups…and they say they will take care of any funding requirement or pricing correction that may need to encourage faster roll out and growth of this sector,” he added.
“So the government, industry and the startups and innovators are all working as a team and we are confident that there may be a problem in the short run but we will emerge winners in the mid to long runs... There is an opportunity even in this crisis and problem," he summed up saying.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
