Union Minister for Coal and Mines G Kishan Reddy's announcement on July 12, 2025, that India will begin domestic production of rare earth magnets within three to four months marks a pivotal moment in the country's strategic response to China's weaponization of critical mineral supply chains. This ambitious initiative represents India's most significant effort to reduce its complete dependence on Chinese rare earth permanent magnets, which are essential components for electric vehicles, wind turbines, defence systems, and space technology.

China's Strategic Grip On Global Supply Chains

China's dominance in the rare earth sector has created a formidable strategic advantage that extends far beyond economic leverage. The country controls approximately 90% of global rare earth processing capacity and 70% of rare earth magnet production, positioning itself as the undisputed hegemon in these critical materials. This dominance became weaponized when China imposed export controls on seven rare earth elements in April 2025, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.

The export restrictions, implemented as retaliation against US tariffs, have created widespread disruptions across global supply chains. The new licensing requirements mandate detailed end-use disclosures and client declarations, with confirmation that products will not be used in defence applications or re-exported to the US. These measures have resulted in a 75% drop in magnet exports in the two months following implementation, forcing manufacturers worldwide to wait weeks for shipments or completely rework their sourcing strategies.

For India specifically, the impact has been severe. The country imported approximately 53,748 metric tons of rare earth magnets in fiscal year 2024-25, with over 80% sourced from China. Indian automakers, particularly in the electric vehicle sector, have reported significant supply disruptions, with companies like Bajaj Auto warning that delays in securing magnets could "seriously impact" electric vehicle production. The Society of Indian Automobile Manufacturers has urgently appealed to the government for immediate dialogue with China to expedite stalled approvals and simplify complex procedures.

India's Strategic Counter-Response: Immediate Production Initiative

The centrepiece of India's response is the rapid deployment of domestic rare earth magnet production capabilities. The Non-Ferrous Materials Technology Development Centre (NFTDC), operating under the Ministry of Mines in Hyderabad, has successfully developed a permanent magnet processing unit with necessary equipment. This facility will serve as the foundation for technology transfer to private factories within the next three to four months, enabling India to begin producing permanent magnets domestically.

Minister Reddy emphasised that this initiative represents a "whole-of-government" approach, involving collaboration between the industry, mining, and other ministries, with direct discussions held with Prime Minister Narendra Modi. The urgency of this initiative is underscored by India's previous 100% dependence on China for rare earth permanent magnets, a vulnerability that China has now exploited through its export restrictions.

Financial Incentives And Policy Support

The government has allocated ₹1,345 crore for incentive schemes to promote domestic rare earth magnet production. This initiative follows the successful model of Production Linked Incentive (PLI) schemes that have proven effective in other sectors such as electronics, pharmaceuticals, and solar panels. The incentive structure is designed to provide financial support during the critical early stages of production, helping overcome significant barriers to entry that have previously deterred private investment.

Reports suggest that the Modi government is planning to invest between ₹3,500 crore and ₹5,000 crore to provide comprehensive incentives for companies to establish rare earth processing and magnet production facilities. This substantial financial commitment reflects the strategic importance the government places on achieving self-reliance in critical minerals.

Industry Engagement And Private Sector Participation

Major Indian companies are actively exploring domestic rare earth magnet production. Mahindra & Mahindra, which recently launched two electric SUVs, has expressed openness to partnering with other firms or entering long-term supply contracts with domestic producers. The company's captive demand for magnets makes local production economically viable, with executives indicating that the investment required is not prohibitively high.

Uno Minda, a key supplier to major automakers including Maruti Suzuki, has also expressed interest in domestic magnet manufacturing. This is particularly significant as Maruti Suzuki has already warned of potential production delays due to disrupted rare earth magnet supply from China. Sona Comstar, which supplies components to Ford and Stellantis, was the first Indian company to publicly announce its intention to produce magnets domestically.

Redirecting IREL's Export Strategy

In a significant strategic shift, the government directed state-run Indian Rare Earths Limited (IREL) to suspend its 13-year-old export agreement with Japan in June 2025. This decision, conveyed by Commerce Minister Piyush Goyal, aims to redirect rare earth supplies for domestic use and reduce reliance on Chinese imports. Under the 2012 agreement, IREL supplied rare earths to Toyotsu Rare Earths India, a subsidiary of Toyota Tsusho, which processed them for export to Japan.

In 2024, Toyotsu shipped over 1,000 metric tons of rare earth materials to Japan, representing approximately one-third of IREL's total output of 2,900 tons. The suspension of this arrangement ensures that India's limited rare earth production is prioritised for domestic processing and value addition rather than raw material export.

Expansion of Domestic Production Capacity

IREL is significantly expanding its production capabilities. The company's Rare Earth Extraction Plant (REEP) at Odisha Sand Complex has an installed capacity of 11,200 tons per annum of mixed rare earth chlorides. The facility has provisions for expanding processing capacity from 10,000 tons to 20,000 tons per annum in the near future. Additionally, the Rare Earths Division at Aluva, Kerala produces high-purity individual rare earth oxides including lanthanum, cerium, neodymium-praseodymium, samarium, europium, gadolinium, and yttrium with more than 99% purity.

National Critical Mineral Mission And Strategic Framework: Comprehensive Policy Architecture

The National Critical Mineral Mission (NCMM), launched in January 2025 with an expenditure of ₹16,300 crore and expected investment of ₹18,000 crore by public sector undertakings, provides the overarching framework for India's critical mineral strategy. The mission encompasses all stages of the value chain, including mineral exploration, mining, beneficiation, processing, and recovery from end-of-life products.

The mission targets completion of 1,200 domestic exploration projects by 2030-31, with the aim of ensuring domestic production of at least 15 critical minerals. The Geological Survey of India (GSI) is conducting 195 projects in the 2024-25 field season, including 35 in Rajasthan focused on identifying and assessing critical mineral deposits.

The NCMM includes provisions for developing strategic reserves of critical minerals to mitigate risks from global supply chain disruptions. The mission envisions creating a National Critical Minerals Stockpile comprising at least 5 critical minerals, along with incentive schemes for mineral recycling with a budget of  ₹1,500 crore targeting recovery of 400 kilotons of recycled material.

Multilateral Engagement

Prime Minister Modi has actively engaged in international forums to address the weaponization of critical mineral supply chains. At the 17th BRICS Summit in Rio de Janeiro, Modi emphasized that strategic minerals vital for clean energy, electronics, and electric mobility should not be monopolised or weaponized by any country. His remarks, while not naming China specifically, were interpreted as a direct challenge to China's dominance in rare earth processing.

Modi's proposal for BRICS collaboration on critical mineral security reflects India's strategy of working within multilateral frameworks while also aligning with like-minded strategic partners through initiatives like the Quad Critical Minerals Initiative. This dual approach aims to balance China's dominance while reinforcing India's position in the global green economy.

Bilateral Partnerships And Resource Diversification

India is actively pursuing bilateral partnerships to diversify its critical mineral supply sources. During Prime Minister Modi's recent visit to Ghana, the two countries finalised a significant agreement on rare earth mineral mining, marking a crucial step toward reducing dependence on Chinese supplies. The agreement is both economically and geopolitically significant, representing India's strategic pivot toward African partnerships for resource security.

India and five Central Asian countries have expressed interest in joint exploration of rare earth and critical minerals, with plans for a second India-Central Asia Rare Earth Forum. The participating nations - Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan - have encouraged exchange of delegations to explore new areas of cooperation in critical minerals.

IREL has sent exploration teams to Myanmar to assess local rare earth resources, and the government is working with five Central Asian nations to explore joint mining projects for critical minerals. These efforts aim to supplement India's raw material needs for future magnet manufacturing while reducing dependence on Chinese sources.

Reserve Position And Mining Challenges

India holds the world's fifth-largest reserves of rare earth minerals, totalling approximately 6.9 million metric tons, representing about 8% of global reserves. However, despite these substantial reserves, India contributes less than 1% of global rare earth mining, highlighting the significant gap between potential and actual production.

The country's rare earth reserves are primarily found in monazite sands along coastal states including Tamil Nadu, Kerala, Andhra Pradesh, and Odisha. These deposits contain thorium, making them strategically important for India's nuclear energy program but also complicating extraction due to radioactive content and regulatory constraints.

Production Capacity And Technical Capabilities

India possesses adequate capacity for mining, processing, extraction, refining, and production of high-purity rare earth oxides through IREL's established facilities. However, India lacks facilities to produce intermediate products like alloys and magnets, creating a critical gap in the value chain. The country has facilities for mining, separating, and refining rare earths into oxides and can extract metals, but the absence of downstream processing capabilities has historically necessitated imports of finished products.

India's ambitious rare earth magnet production initiative represents a strategic inflection point in the country's approach to critical mineral security. By leveraging domestic technological capabilities, substantial financial incentives, and international partnerships, India is positioning itself to reduce its dangerous dependence on Chinese supply chains while building indigenous capabilities for the future. The success of this initiative will significantly influence India's trajectory toward technological self-reliance and economic security in an increasingly multipolar world.

IDN (With Agency Inputs)