Several overseas suppliers have expressed interest in providing rare earth materials to the South Asian nation
[DELHI] India plans to almost triple the size of its incentive programme for rare earth magnet manufacturing to more than 70 billion rupees (S$1 billion) as it races to build domestic capacity in a sector dominated by China, according to sources familiar with the matter.
The proposal, awaiting Cabinet approval, represents a significant step-up from an earlier US$290 million plan aimed at securing critical materials for electric vehicles, renewable energy and defence, the sources said, asking not to be identified as the information is not public. The final allocation could still change, they said.
India is joining several nations in accelerating efforts to develop a supply chain for rare earth magnets after China, which processes about 90 per cent of global output, tightened export controls in April amid its trade dispute with the US, disrupting supplies for automakers worldwide. Earlier this year, Prime Minister Narendra Modi warned that critical minerals should not be weaponised, while calling for stable, diversified global supply chains.
The South Asian nation’s rare earth expansion plan aligns with global efforts to reduce reliance on China, but faces challenges from limited funding, expertise, and long project timelines. With domestic production still nonviable without subsidies, state-owned firms are leading early efforts to secure overseas mining partnerships.
Also, the technological know-how for now stays heavily concentrated in China. Mining rare earths economically is another challenge and often poses environmental risks due to their association with radioactive elements.
The government initiative will support about five companies through a mix of production-linked and capital subsidies, according to the sources. China has recently issued the first licenses allowing imports of rare earth magnets for use in India, but none have been granted to Indian-origin firms, they said.
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A spokesperson for the Ministry of Heavy Industries did not immediately respond to a request for comment made on Sunday (Nov 2).
Magnet-free
The government is also funding studies on the so-called synchronous reluctance motors, a technology that could eventually reduce dependence on rare earth materials, according to the sources.
Several overseas suppliers have expressed interest in providing rare earth materials to India, whose projected annual demand of about 2,000 tonnes of oxides can be easily met by global producers, they said.
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India is betting the expanded programme will draw global magnet makers to set up local subsidiaries or joint ventures, cutting its reliance on Chinese imports long backed by opaque subsidies and aggressive pricing.
The plan could face headwinds if China’s recent easing of export curbs for the US and European Union is extended to India. That could make Chinese magnets cheaper and more accessible globally, potentially deterring long-term investment in India’s nascent sector. BLOOMBERG
