India is on the verge of launching a major initiative valued between Rs 3,500 crore and Rs 5,000 crore to enhance domestic production of rare earth minerals and the magnets derived from them. The proposal may receive final government approval within two weeks, as confirmed by a senior official, according to The Economic Times.
The planned scheme comes in the wake of China’s move in April to tighten export rules on rare earth materials, a development that has disrupted global supply chains. The restrictions have created bottlenecks for key sectors, including the automotive and technology industries in the US, Europe, and India, all of which heavily depend on rare earth magnets.
Indian Industry Shows Early Interest
At least five leading Indian companies have shown early interest in participating in this initiative. As per the senior official, the scheme will operate through a reverse auction model to allocate incentives, encouraging competitive pricing and production efficiency, states the report.
The programme follows a ministerial-level assessment that highlighted the need for India to secure alternative supply sources. Indian automobile manufacturers, concerned by the supply crunch, have urged the government for timely support.
Domestic Production Gap Despite Abundant Reserves
India holds an estimated 6.9 million metric tonnes of rare earth reserves, placing it fifth globally. However, the country has yet to establish a manufacturing base for rare earth magnets. Data for FY25 reveals that India imported 53,748 metric tonnes of these magnets, mainly from China.
China’s Market Dominance Shrinking
China, which manufactures nearly 90 per cent of the world’s permanent rare earth magnets, has used its dominant position strategically amid ongoing trade tensions with the US. On April 4, it expanded export controls to cover not just raw materials but also magnet products containing trace amounts of restricted elements.
In May, China’s rare earth product exports plunged to 2,117 tonnes, a five-year low and a 61 per cent drop compared to the same month in 2023, Bloomberg reported. These exports primarily comprise finished magnets rather than raw materials.
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