Government unveils ₹7,350 crore plan to end China dependency for critical rare earth magnets

The central government is in the final stages of launching a ₹7,350 crore scheme to spur domestic production of sintered rare earth permanent magnets and cut import dependence, following China's imposition of restrictions on exports of these critical components in April.

The initiative, likely to be called the Scheme to Promote Sintered Rare Earth Permanent Magnet Manufacturing in India, aims to establish a fully indigenous manufacturing ecosystem with an annual production capacity of up to 6,000 tonnes over seven years.

While some restrictions were temporarily lifted in August and September 2025 following talks between External Affairs Minister S Jaishankar and Chinese Foreign Minister Wang Yi, the supply disruptions have exposed India's vulnerability.

India currently imports almost all of its rare earth permanent magnet needs, with domestic demand at around 4,010 tonnes annually, expected to almost double to 8,220 tonnes by 2030. The curbs affected critical sectors, with tunnel boring machines for infrastructure projects held back and automobile and electronics industries repeatedly flagging shortages, warning of production risks.

Under the scheme, the government will back the creation of five integrated manufacturing units, each with a capacity of up to 1,200 tonnes per annum, with applicants able to bid for a minimum of 600 tonnes per annum in 100-tonne increments.

Selected firms will be eligible for two forms of financial support: a sales-linked incentive on the sale of sintered NdFeB magnets and a capital subsidy for establishing integrated manufacturing units. Applicants must specify the per-kilogram sales incentive they seek, capped at ₹2,150 per kg of sintered NdFeB magnet, assuming an average sale price of ₹5,000 per kg.

Indian Rare Earths Ltd currently produces around 500 tonnes of NdPr oxide annually, sufficient for roughly 1,500 tonnes of sintered magnets, meaning participants will need to secure most of their NdPr oxide independently to meet the balance 4,500 tonnes per annum production target.

The proposed scheme will incentivise facilities capable of undertaking the final three stages: converting rare earth oxide to metal, metal to alloy, and alloy to magnet - steps for which India currently lacks the technology and infrastructure.

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