In a significant move toward self-reliance, the Union Cabinet has greenlit a massive ₹7,280 crore scheme to establish domestic production of sintered rare earth permanent magnets. This marks India's first dedicated initiative to cut down on imported magnets crucial for electric vehicles, renewable energy systems, aerospace, and defense applications.
Scheme Details and Financial Support
The government plans to create an annual manufacturing capacity of 6,000 metric tons of rare earth permanent magnets (REPM) through five selected beneficiaries. These beneficiaries will be chosen via a global competitive bidding process, with each potentially receiving up to 1,200 metric tons per annum of capacity.
The financial package includes ₹6,450 crore in sales-linked incentives distributed over five years, along with ₹750 crore in capital subsidy for establishing integrated manufacturing facilities. The scheme will operate for seven years total, including a two-year setup period followed by five years of incentive disbursement tied directly to REPM sales performance.
Building an Integrated Manufacturing Ecosystem
This initiative will support India's first fully integrated REPM manufacturing ecosystem, covering the entire production chain from rare earth oxides to metals, metals to alloys, and alloys to finished magnets. Currently, India depends almost entirely on imports for its magnet supply, despite projections showing the country's consumption of rare earth permanent magnets doubling by 2030.
The growing demand is primarily driven by electric vehicle manufacturers, industrial applications, renewable energy projects, electronics, and consumer devices. This scheme aims to secure supply chains for critical sectors including electric mobility, defense systems, industrial machinery, and renewable energy equipment while supporting India's Net Zero 2070 target.
Expert Analysis and Future Outlook
Raju Kumar, Partner and Energy Leader for Tax at EY India, told TOI that this scheme could significantly accelerate localization across key segments of the magnet value chain. He noted that India is well-positioned to localize light-rare earth element processing and develop competitive sintered magnet capacity, though high-purity metals and heavy-rare earth element separation might take longer to mature.
"The only real execution challenge is accelerating clearances for mining and chemical processing, but that's also a major opportunity," Kumar stated. He emphasized that a dedicated, time-bound Critical Minerals Authority with strong environmental, social, and governance standards could transform this bottleneck into a national advantage, giving investors confidence and enabling India to build a genuinely integrated mine-to-magnet ecosystem.
According to the government, this initiative represents part of a broader strategy to develop domestic capabilities in critical minerals and advanced materials, strengthening India's position in global supply chains while reducing foreign dependence in strategically important sectors.
