Why in the News?

• The Union Cabinet has approved a Rs. 7,280-crore scheme to establish India’s first integrated manufacturing ecosystem for Sintered Rare Earth Permanent Magnets (REPMs).

What’s in Today’s Article?

• Rare Earth Magnet Scheme (Rationale, Key Features, Strategic Significance, Industry Response, Global Context, Challenges, etc.)

Rationale for the Rare Earth Magnet Scheme

• India currently imports almost all the rare earth permanent magnets it uses, around 900 tonnes annually, despite having the world's 5^th largest rare earth reserves.
• These magnets are among the strongest permanent magnets and are indispensable to high-tech systems:

• EV traction motors, power steering, wiper motors, braking systems,
• Wind turbine generators,
• Consumer electronics and industrial equipment,
• Aerospace and defence applications.

• Demand is expected to double by 2030, driven primarily by the EV and renewable energy sectors.
• The disruptions caused by Chinese export controls in 2024-25 further underlined the need for India to develop secure, domestic REPM capabilities.

Key Features of the Approved Scheme

• 7,280-Crore Outlay with Dual Incentive Structure
  • As detailed across the three reports, the financial structure includes:

• Rs. 6,450 crore in sales-linked incentives (spread over five years),
• Rs. 750 crore in capital subsidy for setting up facilities.
• This is part of a seven-year scheme period, two years for plant establishment and five years for incentive disbursement.

• 5 Beneficiaries via Global Competitive Bidding
  • The total capacity of 6,000 million tonnes per annum (MTPA) will be allocated to five selected manufacturers, each eligible for up to 1,200 MTPA.
  • Applicants will be chosen through a transparent international bidding process.
• End-to-End Integrated Manufacturing
  • Beneficiaries must build full-stack facilities capable of converting:
    • rare earth oxides > metals > alloys > finished magnets.

• This integration is central to reducing India's reliance not only on finished REPMs but also on upstream value chains currently controlled by foreign markets.

Strategic Importance for India’s Clean-Tech and Defence Ecosystem

• Boosting Electric Mobility & Renewable Energy
  • REPMs, especially Neodymium-Iron-Boron (NdFeB) magnets, are crucial for efficient and powerful EV motors.
  • The auto sector welcomed the scheme as a major step toward a stable, localised component supply chain, reducing risks of shortages and preventing EV price escalation.
• Strengthening Defence and Aerospace Capabilities
  • Magnets are critical in precision-guided munitions, unmanned systems, avionics, and radar technologies. Local manufacturing enhances India’s defence security and reduces dependence on geopolitically sensitive supply chains.
• Alignment with Net Zero and Critical Minerals Strategy
  • The scheme aligns with India’s target of Net Zero by 2070 and builds on the National Critical Minerals Mission, which identifies REPMs as strategic components for energy transition and advanced manufacturing.
  • Experts highlighted that this initiative will catalyse mining, processing, alloying, and high-value materials research.

Industry Response and Global Context

• Automobile & Component Manufacturers
  • Automotive bodies termed the decision pivotal for India’s long-term competitiveness and integration into global value chains. They emphasised that local REPM production would:

• reduce import dependence,
• protect manufacturers from Chinese export restrictions,
• unlock investments in advanced mobility technologies.

• China’s Dominance and Supply Chain Constraints
  • Globally, China controls over 80% of REPM processing and has increasingly tightened export controls, impacting EV and electronics manufacturers worldwide.
  • Indian automakers faced procurement delays due to prolonged Chinese approval procedures requiring end-user licences and bureaucratic clearance.
• This backdrop makes India’s initiative not merely economic but geostrategic, ensuring insulation from external shocks.

Implementation Challenges and Considerations

• Experts caution that success depends on:

• securing advanced technologies for processing and sintering,
• building high-purity oxide-to-metal conversion capabilities,
• maintaining ESG standards, responsible mining, and sustainable extraction,
• ensuring disciplined execution and adherence to global quality benchmarks.

• These are essential for India to eventually compete in the global REPM market.