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The Cabinet on Wednesday (November 26) approved a ₹7,280 crore scheme that aims to create 6,000 metric tonne annual domestic capacity for rare earth permanent magnets – critical components used in electric vehicles, consumer electronics, wind turbines and defense systems.
The seven-year plan includes sales-linked incentives of ₹6,450 crore over five years and capital subsidy of ₹750 crore for companies setting up facilities within two years. The government plans to select five beneficiaries through a global competitive bidding process, each of which will be allocated up to 1,200 metric tonnes per year.
Aggarwal said the scheme has the potential to connect India’s weakest link in the rare earth supply chain. “If we look at the three-stage process – upstream, midstream and downstream – the big problem has always been midstream capacity,” he said. While India has significant rare earth resources and downstream applications in sectors such as BLDC motors, electronics and renewable energy, significant midstream processing capacity is missing. “The use of the word ‘integrated’ in the scheme appears to suggest a combination of upstream and downstream activities under an integrated incentive framework,” he said.
He said his calculations indicate that the incentive works out to around ₹2,150 per kg on an average. “The initial period of two years is tough, but this is a capital-intensive industry,” Agarwal said, adding that the hybrid incentive structure of the scheme—capital subsidy and turnover-linked benefits—could attract serious players. He said the next step should be basic customs duty exemption on capital goods required for setting up new industry.
Industry participants widely welcomed the move, emphasizing the strategic need to reduce dependence on Chinese suppliers. Lohum’s Siddharth Nautiyal said the plan comes at a critical moment when India imports almost all the magnets it uses. “India needs rare earth permanent magnets. We import almost all the magnets used today and this is not a good situation for us from a strategic, geopolitical and risk point of view,” he said. With consumption expected to double in the next five years, the plan aligns well with the government’s National Critical Mineral Mission. “It would be a great plan to move things forward,” he said, confirming that LOHUM will evaluate an application. “We will certainly evaluate the plan more closely. It appears positive and will motivate us to invest more.”
For the automotive industry, which will be one of the major beneficiaries of domestic magnet manufacturing, the plan could help reduce the volatility associated with China’s export controls. ACMA’s Vinny Mehta said recent developments highlight the risks. “It’s too hot, too cold,” he said, adding that four or five Indian companies recently received rare earth magnet export licenses from China, but no new approvals have been received since then. “Out of more than 50 companies that applied for licenses, only four or five have received licenses.”
Mehta said the industry sees strong strategic value in localization of magnet production. “You don’t want someone turning off the tap,” he said, adding that many ACMA members are likely to weigh in on the plan once more details are released.
India’s rare earth magnet demand is projected to reach more than 8,000 tonnes by 2030, with experts saying the government’s plan to build 6,000 tonnes of domestic capacity is a strong first step. But success will depend on how quickly the midstream gap can be bridged, how competitive the bidding terms are, and whether the two-year period for setting up the factory can be realistically met.
Watch the attached video for the full discussion.