MC EXPLAINER Rs 7,280 crore boost for rare-earths: How India plans to take the fight to China

India readies plan to boost rare-earth magnet production.

It all started with the Chinese squeeze on rare-earth magnets, the force that drives the global automotive, defence, electronics, and the EV industry. China is the dominant force in this critical sector that powers everything that you and I use in our day to day lives. The move sent shockwaves through the global manufacturing ecosystem rattling big players across sectors. India's automotive sector also felt the heat looking for alternatives to rare-earth magnets.

The response from the government was swift and targeted. The goal was to wean India's manufacturing edifice away from the Chinese rare-earths supply and build our own domestic capacity. Some of the auto players began looking for other options to alleviate concerns about the shortages. Some of the US auto giants like the GM have secured supplies through local rare-earth players and researchers are actively working to come up with options that will replace the need for rare-earths.

The Union Cabinet chaired by Prime Minister Narendra Modi today approved the 'Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets' with an outlay of Rs 7280 crore.

With this big-bang announcement, India has readied itself to be a force in the global rare-earth permanent magnet industry. The plan will help cement India's manufacturing prowess with a target of 6,000 MTPA of integrated Rare Earth Permanent Magnet. The idea is to put India among a handful of global REPM suppliers and enhance self-reliance.

Even though the Chinese control around 90% of the global rare-earths output, the reliance on the dragon comes with risks amid the uncertainty around its trade talks with the US. India's plan envisages attracting global players who could help in ramping up India's manufacturing of the rare-earth permanent magnets and secure supplies to EV players, defence units, auto makers, electronics industry among others.

How the plan works

Through the scheme, the government aims to have a robust and integrated REPM manufacturing capacity. This will entail conversion of rare earth oxides to metals, metals to alloys, and alloys to finished REPMs.

The more than Rs 7,000 crore plan will have a sales-linked incentive of Rs 6,450 crore on REPM sales for five years and capital subsidy of Rs.750 crore for setting up an aggregate of 6,000 MTPA of manufacturing capacity.

There will be a total of five beneficiaries who will be chose through a global competitive bidding process and allotted up to 1,200 MTPA of capacity.

The duration of the scheme will be seven years which will include two years of gestation period for establishing the inter=grated REPM capacity and five years for the incentives on the sale of these magnets.

Mining rare-earths with the right technological knowhow is significant due to its association with radioactive elements. Global expertise is critical in making the process more efficient. India is relying on global players availing this opportunity to set up shop here through subsidiaries and joint ventures and help in cutting reliance on China.

The real challenge comes from making the manufacturing economically viable. China, which has eased some of its curbs recently for US and EU, could do the same for India making its magnets more cheaper and accessible.