India Launches Rare Earth Magnet Scheme to Build Strategic Domestic Supply Chain

Why in the News ?

The Union Cabinet has cleared a ₹7,280-crore Rare Earth Magnet Scheme to establish India’s first integrated manufacturing ecosystem for Sintered Rare Earth Permanent Magnets (REPMs)—critical components used in EVs, wind turbines, defence systems and advanced electronics.

Rationale Behind the Rare Earth Magnet Scheme

• India imports nearly 100% of its rare earth permanent magnets (~900 tonnes annually) despite having the 5th largest global rare earth reserves.
• REPMs are essential for:
  • EV traction motors, power steering, braking, wipers
  • Wind turbine generators
  • Consumer electronics & industrial machinery
  • Aerospace & defence systems
• Demand is projected to double by 2030, driven by growth in EVs and renewable energy.
• Chinese export controls (2024–25) and supply disruptions highlighted the risks of over-dependence on external value chains.
• A domestic REPM ecosystem is vital for economic security, technological sovereignty, and energy transition goals.

Key Features of the Approved Scheme

1. ₹7,280-Crore Outlay with Dual Incentive System

• ₹6,450 crore – Sales-linked incentives (over 5 years)
• ₹750 crore – Capital subsidy for setting up manufacturing units
• Scheme Duration: 7 years (2 years for establishment + 5 years for incentives)

2. Selection of 5 Global Manufacturers

• Total capacity: 6,000 MTPA
• Each selected manufacturer may receive up to 1,200 MTPA
• Selected through international competitive bidding

3. End-to-End Integrated REPM Manufacturing

Beneficiaries must create full value-chain facilities:

• Rare earth oxides → metals → alloys → finished magnets
• This reduces reliance not only on imported magnets but also on upstream processed materials.

Strategic Importance for India’s Energy & Defence Ecosystem

A. Supporting EV & Renewable Energy Transition

• NdFeB magnets improve efficiency and performance of EV motors.
• Domestic production ensures stable supply, reduces import costs, and prevents EV price volatility.

B. Strengthening Defence & Aerospace Capacities

• REPMs are used in:
  • Precision-guided weapons
  • UAVs and unmanned systems
  • Radar systems and avionics
• Local manufacturing enhances national security and decreases dependence on foreign-controlled supply chains.

C. Alignment with Net Zero & Critical Minerals Strategy

• Supports India’s Net Zero by 2070 target.
• Complements the National Critical Minerals Mission, which identifies REPMs as strategic for clean energy and advanced manufacturing.

Industry Response & Global Context

Automotive Sector Reaction

• Auto industry hailed it as crucial for:
  • Reducing import reliance
  • Mitigating risks from Chinese export restrictions
  • Attracting investments into EV & advanced mobility technologies

China’s Dominance

• China controls 80%+ of global REPM processing.
• Recent export controls slowed global supply chains, impacting EV and electronics sectors.
• Indian companies faced delays due to Chinese approval processes requiring end-user licenses.

Geostrategic Dimension

India’s scheme is not just economic—it is a strategic shield against external supply shocks.

Implementation Challenges

Experts highlight that success depends on:

• Access to advanced sintering & processing technologies
• Building high-purity oxide-to-metal conversion abilities
• Ensuring responsible mining, ESG compliance
• Meeting global quality and performance benchmarks
• Efficient execution across mining, processing, manufacturing, and R&D ecosystems