India readies Rs 7,300-cr incentive scheme for rare earth magnet production

The proposed scheme will soon be placed before the Union Cabinet headed by Prime Minister Narendra Modi.

A first of its kind scheme worth Rs 7,300 crore for setting up rare earth magnet processing units and supply chains in India has received the approval of the finance ministry's expenditure finance committee (EFC), according to government officials privy to the development.

The proposed scheme will soon be placed before the Union Cabinet headed by Prime Minister Narendra Modi. The proposal has earmarked Rs 6,500 crore for capital expenditure and Rs 800 crore for operational expenditure.

The move comes after China, the world’s dominant supplier, imposed export restrictions in April this year on seven rare earth elements and finished magnets. Under the revised rules, Chinese exporters must secure licences and submit end-use declarations confirming materials won’t be used in defence or re-exported to the US.

Permanent magnets derived from rare earth elements (REEs) are considered vital for producing power windows, speakers, and propulsion systems in electric vehicles, and generators in renewable energy infrastructure, among others.

India currently imports almost all of its rare earth permanent magnets needs. Government estimates place domestic demand at around 4,010 tonnes a year, expected to almost double to 8,220 tonnes by 2030.

The initiative is likely to be called the Scheme to Promote Sintered Rare Earth Permanent Magnet Manufacturing in India. It will aim to establish a fully indigenous rare earth permanent magnet manufacturing ecosystem with an annual production capacity of up to 6,000 tonnes, sufficient to meet India’s domestic demand. The scheme is expected to run for seven years, according to government officials.