Amid China’s chokehold, how India’s Rs 7,280-crore rare earth magnets push seeks some wriggle room

While Beijing has eased some controls recently, the prolonged restrictions have pushed countries, including India, to look for alternatives and reduce reliance on China.

The new scheme is a small first step in this direction at a time when the stakes are very high. The demand for REPM is rising sharply in India, with the government’s push for large-scale renewable energy expansion and EV adoption. The government estimates that India’s consumption of rare earth permanent magnets is expected to double by 2030.
Yet, India currently meets almost all its REPM requirements through imports.

Decoding the govt’s REPM scheme

Under this scheme, the government aims to support 6,000 metric tonnes per annum (MTPA) of integrated REPM manufacturing capacity, which will be allocated among five beneficiaries selected through a competitive bidding process, with each eligible for up to 1,200 MTPA.

Selected beneficiaries will receive sales-linked incentives worth Rs 6,450 crore over five years, along with a capital subsidy of Rs 750 crore to set up integrated REPM facilities.

The scheme specifically focuses on “sintered rare-earth permanent magnets”, which are primarily neodymium, iron and boron (NdFeB) magnets, considered the strongest and most commercially demanded.

These magnets use light rare-earth elements like neodymium (Nd) and praseodymium (Pr), combined with iron (Fe) and boron (B), for their strong magnetic properties. They also use heavy rare-earth elements such as dysprosium (Dy) and terbium (Tb) to improve susceptibility to demagnetisation, especially at high temperatures.

The production of these magnets involves various steps: mining, beneficiation, processing, extraction, refining to rare earth oxide, conversion of oxides to metal, then metal to alloy, and finally magnet manufacturing. The new scheme aims to support integrated REPM manufacturing facilities which are capable of undertaking final three stages: Converting rare earth oxide to metal, metal to alloy, and alloy to REPM.

Bridging the gap

India currently depends heavily on China for these magnets. During 2024-25, India imported over 53,000 tonnes of rare earth magnets, with over 90 per cent coming from China.

In a press statement, the government said this new scheme aims to enhance the country’s self-reliance and position it as a key player in the global REPM market.

But the question remains: Can this scheme make India truly self-reliant? Where does India stand in the global supply chain?

Outside of China, only a few countries – such as Japan and Vietnam – produce these magnets, but their share in the global market remains minimal.

India, meanwhile, doesn’t have any commercial scale manufacturing, although some companies claim to have the capability.

For India, this scheme marks an initial step in a long and challenging journey.

The scheme’s planned capacity of 6,000 metric tonnes a year looks modest when set against China’s scale. Utah-based Rare Earth Exchanges estimates that China can produce roughly 2,40,000 tonnes of REPM annually –- a stark reminder of the gap India is trying to bridge.

Moreover, domestic production of the raw materials needed for REPM manufacturing also remains limited and mostly depends on imports.

While India does produce some rare earth oxides required for REPM manufacturing, it still has no domestic production of heavy rare earth oxides. Indian Rare Earths Limited (IREL) under the Department of Atomic Energy produces some required light rare earth oxides such as neodymium-praseodymium (NdPr) oxides.

However, IREL’s output would not be sufficient to support the scale of manufacturing envisioned under the new scheme.

“In India, we primarily produce light rare-earth oxides through IREL. The real challenge is with heavy rare-earth oxides,” said Rishabh Jain, fellow at Council on Energy, Environment and Water (CEEW). “To make high-strength magnets, you need heavy rare earths. India doesn’t produce these, so we will have to import them,” he added.

These challenges are further compounded by China’s cost advantage, driven by its massive production scale and tightly integrated value chain, which allow it to offer prices other countries struggle to match.

“Cost competitiveness will remain an issue given China’s scale, value chain integration and subsidies,” he added. “Unless mandated, no one wants to buy a magnet that’s significantly more expensive,” he added.

Steps towards self-reliance

A 2022 US Department of Energy report estimates that about 93% of the NdFeB magnet market is made up of sintered magnets, with China dominating the entire supply chain, especially as it moves down from mining and separation to metal refining and magnet manufacturing.

There have been multiple global efforts to cut this dependence on China. In July, the Quad, comprising India, Australia, Japan, and the United States, launched an initiative to secure supply chains of critical minerals. That followed the Critical Minerals Action Plan put forth at the G7 Summit in Canada in June, which was also endorsed by India.

India, too, launched its National Critical Mineral Mission (NCMM) in January for a period of seven years from 2024-25 to 2030-31. With a proposed outlay of Rs 16,300 crore, it aims to secure India’s critical mineral supply chain by ensuring reliable access to key minerals at home and overseas, and strengthening the entire value chain by improving technology, regulation and financing for exploration, mining, processing and recycling.

In 2023, India identified 30 minerals as “critical”. The same year, the government also amended the Mines and Minerals (Development and Regulation) (MMDR) Act, 1957, empowering the central government to exclusively auction critical and strategic minerals like lithium, cobalt, and rare earth elements etc. Since then, the government has auctioned 34 critical mineral blocks in the country.

India has also set up a Joint Venture company named Khanij Bidesh India Limited (KABIL) for exploring critical mineral assets in foreign countries. KABIL has signed an Exploration and Development Agreement with Camyen, a state-owned enterprise of Catamarca province of Argentina, for exploration and mining of five Lithium Brine Blocks in Argentina.