Why in news?
To counter China’s overwhelming dominance in rare earth magnet manufacturing, the Indian government has approved a ₹7,280-crore scheme to promote domestic production of rare earth permanent magnets (REPMs).
REPMs are critical components for EVs, renewable energy systems, electronics, aerospace, and defence. China currently controls over 90% of global REPM manufacturing and processing.
This gives it significant geopolitical leverage, which it has used during trade disputes.
What’s in Today’s Article?
- Why India Needs Urgent Diversification?
- Government’s REPM Scheme: What It Aims to Achieve?
- India’s Heavy Dependence on China
- Global Diversification Efforts Are Growing
Why India Needs Urgent Diversification?
- India plans large-scale expansion in renewable energy and electric mobility, sharply increasing domestic demand for REPMs.
- The government estimates that India’s magnet consumption will double by 2030.
- However, India imports almost all of its REPM needs, making the country highly vulnerable to external shocks and supply disruptions.
- Also, in April 2025, China imposed export controls on magnets in response to US tariff measures, intensifying global supply concerns.
- The newly approved scheme aims to develop domestic capabilities and reduce over-reliance on China.
- While modest compared to China’s scale, the initiative marks a crucial strategic shift as global stakes rise due to prolonged restrictions and supply chain uncertainty.
Government’s REPM Scheme: What It Aims to Achieve?
- The scheme targets creation of 6,000 MTPA of integrated REPM manufacturing capacity.
- This capacity will be divided among five beneficiaries, each eligible for up to 1,200 MTPA through a competitive bidding process.
- Incentives and Financial Support
- Selected companies will receive:
- ₹6,450 crore in sales-linked incentives over five years
- ₹750 crore as capital subsidy for setting up integrated facilities
- The financial support is designed to encourage large-scale, commercially viable manufacturing.
- Focus on High-Demand NdFeB Magnets
- The scheme prioritises sintered rare-earth permanent magnets, specifically neodymium–iron–boron (NdFeB) magnets, which are the strongest and most widely used.
- These magnets rely on:
- Light rare-earths: Neodymium (Nd), Praseodymium (Pr)
- Heavy rare-earths: Dysprosium (Dy), Terbium (Tb) for better high-temperature performance
- What Integrated REPM Manufacturing Involves?
- The REPM production chain includes:
- Mining
- Beneficiation
- Processing
- Extraction
- Refining to rare earth oxides
- Conversion of oxides to metal
- Metal to alloy
- Alloy to magnet
- The scheme will support facilities capable of performing the final three stages:
- Rare earth oxide → metal
- Metal → alloy
- Alloy → rare earth permanent magnet
India’s Heavy Dependence on China
- India imported over 53,000 tonnes of rare earth magnets in 2024–25, with more than 90% coming from China.
- The new scheme aims to reduce this reliance and build domestic capacity, but major challenges remain.
- Where India Stands in the Global REPM Landscape?
- Outside China, only countries like Japan and Vietnam produce REPMs, and their global share is limited.
- India currently has no commercial-scale manufacturing, only small-scale capabilities at select firms.
- China produces around 2,40,000 tonnes of REPMs annually—far beyond India’s planned 6,000-tonne capacity under the new scheme, underscoring the vast gap.
- Raw Material Bottlenecks: A Key Constraint
- India produces some light rare-earth oxides through IREL—such as neodymium–praseodymium (NdPr) oxides—but no heavy rare-earth oxides like dysprosium and terbium.
- These heavy rare earths are essential for high-strength, high-temperature NdFeB magnets.
- Thus, India will still need to import critical raw materials, limiting true self-reliance.
- The Scale and Cost Challenge
- China’s dominance comes from:
- Massive production scale
- Fully integrated value chain
- Significant subsidies
- These factors make China’s magnets far cheaper, making cost competitiveness a major hurdle for Indian manufacturers.
- Unless mandated through policy, users are unlikely to buy magnets that are significantly more expensive than Chinese imports.
Global Diversification Efforts Are Growing
- A 2022 US Department of Energy report shows that 93% of the global NdFeB magnet market is dominated by sintered magnets—and China controls almost the entire supply chain, from mining to magnet manufacturing.
- This has pushed countries worldwide to reduce dependency on China.
- International Initiatives to Secure Critical Minerals
- Quad Initiative (2024) - In July, the Quad countries — India, Australia, Japan, and the US — launched a supply chain initiative to secure access to critical minerals, reducing reliance on China.
- G7 Critical Minerals Action Plan (2024) - India endorsed the G7’s Critical Minerals Action Plan, which focuses on building diversified and resilient global supply chains.
- India’s National Critical Mineral Mission (NCMM)
- Launched in January 2024 for seven years (2024–25 to 2030–31), the NCMM aims to secure India’s critical mineral supply chain through:
- Reliable domestic and overseas mineral access
- Strengthening exploration, processing, and recycling
- Improving technology, regulation, and financing
- The mission has an outlay of ₹16,300 crore.
- Reforming Domestic Mineral Governance
- In 2023, India identified 30 minerals as “critical”.
- The government amended the MMDR Act, 1957, giving the Centre exclusive powers to auction critical and strategic minerals such as lithium, cobalt, and rare earth elements.
- Since the amendment, 34 critical mineral blocks have been auctioned.
- Securing Overseas Resources: The Role of KABIL
- India established Khanij Bidesh India Limited (KABIL), a joint venture tasked with identifying and developing critical mineral assets abroad.
- KABIL has signed an agreement with Camyen, a state-owned firm in Catamarca, Argentina, to explore and mine five lithium brine blocks, expanding India’s access to essential battery minerals.
