Countering China: India eyes Rs 1,345 crore scheme on rare earth magnets; Indian companies express interest

Amidst ongoing supply choke for rare earths from China, India has announced its plans to develop rare earth magnets domestically. The government has allocated Rs 1,345 crore towards establishing domestic production capabilities for rare earth magnets, Heavy Industries Minister HD Kumaraswamy said on Friday according to an ET report.

This initiative follows China's decision to enforce export controls on seven rare earth elements and finished magnets. The updated Chinese regulations require exporters to obtain permits and provide documentation ensuring the materials are not utilised for defence purposes or re-exported to the United States.

The Ministry of Heavy Industries Secretary, Kamran Rizvi, confirmed that the draft scheme for processing rare earth magnets has been distributed for inter-ministerial review, paving the way for a detailed policy implementation.

According to earlier PTI reports, sources indicated that the Heavy Industries and Mines ministries were collaborating to develop guidelines aimed at encouraging domestic manufacturing of rare earth magnets and minerals, which are essential components for telecommunications, electric vehicles, and defence industries.

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India Explores Rare Earth OptionsIndia, which brought in over 80% of its 540 tonnes of magnets from China in the previous fiscal year, is experiencing the effects of stricter regulatory measures.

Officials informed PTI that the initiative is vital for securing supply chains, as Beijing dominates more than 90% of worldwide magnet processing capabilities. These magnets are essential for various applications, including electric motors, braking systems, smartphones and missile guidance technologies.

The US Geological Survey indicates that whilst China possesses the world's largest rare earth element reserves, estimated at 44 million tonnes, India holds the third position globally with deposits of 6.9 million tonnes.

Indian Companies Show Interest in Domestic Magnet Production
The initiative aims to incentivise both private and state-owned enterprises to develop local capabilities across the supply chain, from mineral extraction and processing to magnet manufacturing, the ET report said.

According to Reuters sources on Thursday, automotive manufacturer Mahindra & Mahindra and component producer Uno Minda have shown keen interest in establishing local magnet production facilities.

Also Read | Bold, but difficult mission! How India wants to counter China’s rare earth magnets monopoly - explained

At discussions with the Ministry of Heavy Industries in June, Mahindra expressed willingness to collaborate with an established manufacturer or secure long-term supply arrangements with a domestic producer.

The company's increasing demand for magnets stems from its expanding electric SUV portfolio. Uno Minda, a key supplier to manufacturers like Maruti Suzuki, has also indicated interest in domestic production.

These developments follow Sona Comstar 's earlier initiative. The company, which provides gears and motors to international firms including Ford and Stellantis, was the first Indian enterprise to formally declare interest in domestic magnet production.

Reuters reports that officials indicate final investment decisions will depend on the scheme's incentive structure and access to raw materials.