The government is preparing to come up with a Rs1,350 crore scheme to incentivise the domestic production of rare earth magnets, aiming to reduce dependence on Chinese imports, official sources said. Subsidy levels are still under discussion, with some companies proposing support ranging from 30% to 50%. The final subsidy structure will determine the full budgetary impact of the scheme.
The scheme, is likely to run for seven years, and is expected to support the development of a local supply chain for these critical components, used in electric vehicles, electronics, and defence applications.
Sources said that a concept note has already been circulated by the ministry of heavy industries to other departments, including the ministry of mines, ministry of finance, department of atomic energy, and NITI Aayog, outlining the proposed plan. The initiative follows China’s recent move to tighten exports of rare earths, raising concerns over global supply chains.
“The Rs 1,350 crore fund should be sufficient to build the required domestic capabilities. Industry feedback suggests it will take two years to set up processing, and magnets made in India could be ready in about three years,” an official said.
India currently imports the bulk of its rare earth magnets, with imports touching 53,000 metric tonnes in FY25. Despite having 6.9 million metric tonnes in reserves, India mined only 2,900 tonnes of rare earth material in 2024. State-run IREL is the only entity currently mining and refining rare earth elements in the country.
At least five to six companies are understood to have shown interest in manufacturing magnets domestically. These include major importer Sona Comstar and Hyderabad-based Midwest Advanced Materials, which has committed to producing 500 tonnes by end-2025 and scaling to 5,000 tonnes in 2026.