India’s Bold Move: $290 Million Push to Boost Rare-Earth Magnet Production

India is launching a ₹25 billion ($290 million) initiative to boost domestic production of rare-earth magnets, essential for electric vehicles and wind turbines, reducing reliance on China, which dominates 90% of global processing. The program aims to support firms like Vedanta, JSW, and Sona BLW, targeting 4,000 tons of magnet production over seven years. While challenges like China’s technological edge and environmental risks persist, India’s plan emphasizes local sourcing and aligns with global efforts to secure critical minerals for green technologies.

India is taking a significant step to strengthen its local supply chain for rare-earth magnets, a crucial component in electric vehicles (EVs) and wind turbines. The initiative, aimed at reducing dependency on China, is already attracting interest from major conglomerates, according to sources familiar with the matter.

The government is preparing an incentive program worth up to ₹25 billion ($290 million) to support private companies in manufacturing these magnets, insiders revealed. Among the interested parties are industry giants like Vedanta Group, led by billionaire Anil Agarwal, JSW Group headed by Sajjan Jindal, and EV component manufacturer Sona BLW Precision Forgings.

A policy proposal outlining the initiative is expected to reach the cabinet for approval shortly. However, the exact budget and details may still undergo revisions as internal consultations continue.

Cutting Dependence on China

India’s focus on rare-earth magnets has intensified following China’s recent export restrictions on these materials amidst escalating trade tensions with the United States. China dominates the global rare-earths processing sector, controlling nearly 90% of the market. This move by Beijing has disrupted supply chains for automakers worldwide, including those operating in India.

During the recent BRICS summit in Rio de Janeiro, Indian Prime Minister Narendra Modi emphasized the need for a reliable supply of critical minerals. “It’s essential to ensure that no country uses these resources for selfish gains or as a weapon against others,” Modi said, reflecting India’s strategic vision for resource independence.

Ambitious Production Goals

India plans to foster the growth of three to four large manufacturers capable of producing approximately 4,000 tons of neodymium and praseodymium-based magnets over the next seven years. These magnets will be developed using locally mined raw materials.

The incentive program includes a two-year preparatory period, followed by five years of financial support once manufacturing begins. According to the proposal, the government may invest up to ₹6 billion for every 1,000 tons of production capacity.

Vedanta Group, one of the interested companies, highlighted the strategic importance of rare earths in advancing green technologies. “These minerals are quickly becoming new levers of global influence,” a Vedanta spokesperson stated.

Sona BLW, a leading Indian producer of EV traction motors, views this initiative as a pathway to securing its supply chain. CEO Vivek Vikram Singh noted that the company may partner with a technology provider to develop these magnets.

Challenges and Opportunities

India’s budget for the rare-earth magnet initiative, though significant, is modest compared to the scale of global demand. Additionally, the timeline is ambitious, as building mines and processing facilities can take years. Expertise in rare-earth processing remains concentrated in China, presenting another hurdle.

Despite the name, rare earths are not geologically scarce. However, extracting them economically is challenging due to their low concentrations and association with radioactive elements, which poses environmental concerns.

A Nascent Industry

India’s efforts to establish a domestic rare-earth industry are still in their infancy. State-owned Khanij Bidesh India Ltd. is spearheading early initiatives, securing mining concessions in countries like Argentina, Zambia, and Australia.

Domestically, the lack of subsidies makes rare-earth magnet production financially unviable. Currently, Indian Rare Earths Ltd., a state-owned enterprise, supplies the necessary raw materials. However, without both capital and operational subsidies, projects in this sector yield negative returns, according to insiders.

Incentives and Local Sourcing

The government’s proposed blueprint plans to invite bids for annual production capacities ranging from 500 to 1,500 tons. To qualify, companies must adhere to stringent requirements, including sourcing at least 50% of the value of their final product from locally produced neodymium-praseodymium oxide. This requirement will increase to 80% by the fifth year of production.

India’s push to develop a rare-earth magnet industry aligns with global efforts to secure critical mineral supplies for green technologies. While challenges remain, this initiative marks a significant step toward reducing reliance on imports and fostering domestic innovation in a strategically vital sector.