India Moves to Challenge China’s Rare Earth Monopoly with ₹1,345 Cr Manufacturing Push

In a strategic move to reduce dependency on Chinese imports and secure critical technology supply chains, the Indian government has announced a ₹1,345 crore incentive scheme to promote domestic production of rare earth magnets. The announcement was made by Union Minister for Heavy Industries, H. D. Kumaraswamy, following China’s imposition of export restrictions on key rare earth elements and finished magnets earlier this year.

The scheme, currently under inter-ministerial consultation, aims to support “end-to-end” manufacturing—from rare earth oxides to finished magnets. According to Kamran Rizvi, Secretary at the Ministry of Heavy Industries, the policy draft has already been circulated. Once consultations conclude, it will be presented to the Union Cabinet for final approval.

India’s decision comes in response to Beijing tightening its control over rare earth exports, demanding end-use declarations and prohibiting their use in defence or re-export to the U.S.A. With China controlling over 90% of global magnet processing capacity and supplying more than 80% of India’s rare earth magnet imports, the move is seen as crucial to safeguard the country’s industrial and strategic interests.

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Private Sector Interest and Strategic Partnerships

The proposed scheme is expected to benefit both private companies and public sector units. Automotive major Mahindra & Mahindra and component maker Uno Minda have already expressed strong interest in setting up magnet production facilities. Mahindra, which is rapidly expanding its electric SUV portfolio, has indicated a willingness to partner with existing players or secure long-term local supply contracts. Uno Minda, which supplies parts to firms like Maruti Suzuki, is also exploring opportunities in this space.

Sona BLW Precision Forgings (Sona Comstar), an early mover, has already shown intent to produce magnets locally. All firms are awaiting clarity on incentives and raw material availability before committing to full-scale investments.

National Importance of Rare Earth Magnets

Rare earth magnets are essential for applications in electric motors, hybrid vehicles, smartphones, defence systems, and wind turbines. India currently imports over 80% of its magnets from China despite possessing the world’s third-largest reserves of rare earth elements at 6.9 million tonnes. According to the government, only 20% of these resources have been explored so far.

The scheme envisions domestic production of 4,000 tonnes of neodymium and praseodymium magnets over seven years. The government will initially mandate 50% local sourcing of raw materials, increasing to 80% by the fifth year. India Rare Earths Limited (IREL) will play a pivotal role in supplying raw materials to manufacturers.

Strengthening Domestic Supply Chains

The rare earth magnet scheme is designed to address vulnerabilities in India’s supply chains and promote self-reliance in strategic industries. It aligns with the government’s broader push for Atmanirbhar Bharat and aims to boost domestic capabilities in electric vehicle manufacturing, electronics, and defence technologies. With the scheme’s formal rollout expected soon, India is positioning itself to become a competitive player in the global rare earth market and challenge China’s long-standing monopoly.