Rare earth push: Domestic magnet production aimed through ambitious plan; government may opt for ‘targeted support’

The Indian government is formulating fiscal incentives to boost domestic production of rare earth magnets, essential for EV motors, aiming to reduce reliance on Chinese supply. A scheme is being framed to provide targeted support to the industry, covering capital and operational expenditure. This initiative addresses supply disruptions and strengthens India’s participation in global value chains.

The government is working on fiscal incentives to boost domestic production of rare earth magnets, a segment currently dominated by China and critical for electric vehicle (EV) motors, Union minister for heavy industries and steel H D Kumaraswamy said on Friday.Speaking via a video message at the Automotive Component Manufacturers Association of India’s (ACMA) annual session, Kumaraswamy said a scheme is being framed to provide “targeted support” to the industry, covering both capital and operational expenditure, reported news agency ANI. The plan, he said, is expected to bridge cost gaps, offer tariff relief on key equipment, and ensure supply continuity in the face of global restrictions.“The ministry is actively addressing vulnerabilities in critical raw materials. Recognising that rare earth magnets are central to EV motors and currently dominated by Chinese supply, we are preparing fiscal incentives to encourage domestic production,” the minister said, as per PTI. He added that the scheme would “power India’s participation in global value chains.”The minister had earlier revealed that inter-ministerial consultations were in progress for a Rs 1,345 crore scheme, under which two manufacturers are expected to receive subsidies to set up processing facilities. These units will convert rare earth oxides into magnets, reducing dependence on imports. At present, Indian Rare Earth Magnets Ltd, a PSU under the department of atomic energy, remains the only domestic repository of such minerals.The urgency of the plan comes amid supply disruptions from China, which has tightened export restrictions on key metals, affecting automobile and semiconductor manufacturing worldwide. More than two weeks after Beijing announced easing restrictions, Indian automakers and component makers are still grappling with shortages. Magnets made from rare earth elements, such as neodymium-iron-boron (NdFeB), are essential for high-performance automotive applications, including traction motors in EVs and power steering motors in both electric and conventional vehicles.Industry observers caution that the disruption highlights India’s reliance on China, which accounts for more than 80% of global rare earth magnet exports.While some automakers such as Maruti Suzuki, Tata Motors, and Mahindra & Mahindra have not yet faced disruption, companies are drawing down inventories and exploring alternative compositions. To address long-term vulnerabilities, India is also pursuing supply chain resilience for critical minerals through agreements with countries such as Australia, Argentina, Zambia, and Peru. Khanij Bidesh India Ltd (KABIL) has been tasked with securing overseas mineral assets of strategic importance.