India is preparing to roll out a major scheme valued between ₹3,500 crore and ₹5,000 crore to boost domestic production of rare earth minerals and the essential magnets derived from them.

This initiative comes as a direct response to China’s decision in April 2025 to tighten export controls on rare earth materials and magnet products, which has severely disrupted global supply chains.

The restrictions have led to bottlenecks in key sectors such as automotive and technology, both in India and globally, as these industries rely heavily on rare earth magnets for manufacturing electric vehicles (EVs), wind turbines, and high-tech devices.

Despite having an estimated 6.9 million metric tonnes of rare earth reserves—ranking fifth globally—India has historically lacked a robust manufacturing base for rare earth magnets. In the fiscal year ending March 2025, India imported 53,748 metric tonnes of these magnets, predominantly from China. 

This dependence has become a critical vulnerability, especially as Chinese exports of rare earth products plunged by 61% in May 2025 compared to the previous year, reaching a five-year low.

The proposed scheme aims to incentivise domestic production through a reverse auction process, which will allocate financial support to companies that can deliver the most competitive pricing and production efficiency.

At least five major Indian firms have already expressed preliminary interest in entering the rare earth magnet manufacturing sector. In addition to financial incentives, the government is considering tariff exemptions for machinery used in rare earth processing and magnet manufacturing, as well as regulatory adjustments under the Mines and Minerals (Development and Regulation) Act to streamline domestic production.

The urgency of the initiative is underscored by the concerns of Indian automakers, who have warned of potential production cuts by July if the supply of these critical magnets does not improve.

The government’s long-term objective is to establish India as a significant rare earth magnet manufacturing hub, thereby reducing China’s near-monopoly on the global supply of these materials and securing India’s strategic interests in the green energy and high-tech sectors.

The scheme represents a comprehensive and timely effort by India to address its strategic vulnerabilities, support its automotive and technology industries, and position itself as a key player in the global rare earth magnet market.

The successful implementation of this initiative could significantly alter the dynamics of the global supply chain for these critical materials, providing a much-needed boost to India’s manufacturing and green energy ambitions.

Based On A News18 Report