- Government launches an incentive scheme to expand domestic rare earth magnet production.
- The programme provides subsidies and incentives to five beneficiaries via global bidding.
- Initiative reduces China's dependence and supports the growing demand in strategic sectors.
The government approved an incentive program with a budget of Rs 7,280 crore to establish domestic production of 6,000 tonnes of integrated rare earth magnets each year, aiming to reduce reliance on China for this essential component used in various sectors, including automotive, aerospace, and defense.
The government will distribute the overall production capacity to five beneficiaries via international competitive bidding. Every beneficiary will receive an annual allocation of up to 1,200 million tonnes. This will include sales-related incentives of Rs 6,450 crore over five years and a capital subsidy of Rs 750 crore for establishing manufacturing plants.
The program will operate for seven years from the award date, comprising a 2-year setup period for establishing the manufacturing facility and five years for incentive distribution related to magnet sales.
China controls 90 percent of the worldwide supply chain for rare earth magnets, often referred to as a ‘kill switch’ since it provides Beijing with leverage over importing nations. This vulnerability was revealed in April when China imposed export restrictions on medium and heavy rare earth-related products, citing issues of national security.
This resulted in significant supply interruptions for end-user sectors globally. Deliveries to India were similarly impacted, causing production difficulties for local vehicle manufacturers who depend on these magnets from China for internal combustion engines and electric vehicles.
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India is particularly at risk because of its reliance on imports, primarily from China, combined with increasing demand for these magnets driven by the growing market for EVs, consumer electronics, renewable energy, and various industrial uses. India's use of these magnets is projected to increase twofold by 2030 from approximately 3,600 tonnes this fiscal year.
The incentive program is a component of a broader initiative to diversify the procurement of rare earth materials, particularly magnets, due to their connection to geopolitical issues. India is striving to obtain more rare earth resources from Australia, Vietnam, Chile, and Peru, which account for 10 percent of the global supply chain outside of China.