Industry stakeholders on Tuesday raised concerns over key provisions of the Centre’s ₹7,280 crore scheme aimed at promoting domestic manufacturing of sintered rare earth permanent magnets (REPM), particularly regarding limited raw material allocation and incentive criteria based on magnet weight rather than quality.
The concerns were voiced during a pre-bid meeting attended by around 23 participants, including Reliance Industries, Larsen & Toubro (L&T), Sona Comstar, Proterial, Vedanta, and Tata Autocomp, among others.
According to several participants, one of the biggest issues is the restricted allocation of processed raw materials. Under the scheme, state-run IREL (India) Ltd will allocate a total of 500 MTPA of NdPr oxide to only three selected beneficiaries.
However, the scheme proposes to select up to five beneficiaries, raising concerns among other bidders about long-term access to raw materials.
“How will the remaining bidders secure raw material when availability is already limited outside China? Supply assurance is critical; otherwise, those without assured access could see their projects disrupted,” said one industry participant, requesting anonymity.
Concerns around the incentive structure
Another major concern raised was the incentive structure, which is based on the weight of magnets produced rather than their grade or quality.
“If the same incentives are given for magnets used in electric vehicles and for low-end applications like fans, manufacturers may prioritise cheaper, lower-grade magnets just to maximise incentives, rather than investing in high-performance products for critical sectors,” another executive said.
Using higher amounts of Dysprosium and Terbium in NdFeB magnet production improves performance but significantly increases overall manufacturing costs, further complicating the viability of producing high-grade magnets under the current incentive structure.
Centre’s broader push to reduce dependence on China
The concerns come amid Centre’s broader push to reduce dependence on China for critical inputs such as rare-earth magnets, which are essential for sectors including electric vehicles, electronics, and renewable energy. The scheme was formulated against the backdrop of global supply disruptions following China’s move last year to restrict rare-earth magnet exports amid escalating trade tensions with the United States.
China currently accounts for nearly 60% of global rare-earth mining and about 90% of processing capacity, giving it a dominant position in the supply chain. Recent restrictions have exposed global vulnerabilities, prompting countries, including India, to diversify sourcing and build domestic capabilities.
Under the scheme, companies can bid to set up integrated manufacturing facilities for sintered neodymium-iron-boron magnets in India. The government is offering a mix of capital subsidies, sales-linked incentives, assured raw material supply, and policy support.
The scheme includes a capital subsidy of ₹750 crore for setting up five processing units, along with ₹6,450 crore in sales-linked incentives to be disbursed post-production.
Rare-earth oxides required for production will be supplied by IREL to the three lowest bidders. India holds rare-earth oxide resources of approximately 8.52 million tonnes. The Union Budget for FY27 also announced dedicated rare-earth corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to promote extraction and processing, further supporting domestic magnet manufacturing.
Bidders can apply for manufacturing capacities ranging from 600 to 1,200 tonnes under the global tender.