With the rare earth material supply crisis looming large, the government is set to launch an incentive programme to encourage domestic production of these minerals. The government will roll out a scheme to subsidise domestic production of rare earth magnets in 15-20 days, Heavy Industries Minister H D Kumaraswamy said on Tuesday.
The minister said that consultation with stakeholders is underway to decide the amount of the incentive programme. According to ministry officials, if the total incentive crosses Rs 1,000 crore, the scheme will be sent to the Union cabinet for approval.
The latest crisis emanates from stricter controls imposed by China on the export of seven rare earth elements and finished magnets. This revised framework demands detailed end-use disclosures and client declarations, including confirmation that products will not be used in defense or re-exported to the US. This added scrutiny has prolonged the clearance process to at least 45 days, leading to significant delays and a growing backlog that is tightening global supply chains. China is the world's dominant exporter of rare earth magnets, controlling over 70% of global Rare Earth Element (REE) production and over 90% of refining capacity.
Kumaraswamy on Tuesday said India is looking at alternative sources for procurement of rare earth minerals in the interim period, including Japan and Vietnam. He informed that one Hyderabad-based company has promised to deliver 500 tonnes by this year-end.
The secretary said the actual production of rare earth magnets will take about two years, and the government, along with the industry, is looking at alternative sources of procurement in the interim period, including Japan and Vietnam.
Rare earth magent, an alloy rare earth metal, are integral to Permanent Magnet Synchronous Motors (PMSMs), which are widely used in electric vehicles (EVs) for their high torque, energy efficiency, and compact size. Hybrid vehicles also rely on them for efficient propulsion. In Internal Combustion Engine (ICE) vehicles, their use is primarily limited to electric power steering and other motorized systems. Elements like Dysprosium (Dy), Terbium (Tb), Neodymium (Nd), and Praseodymium (Pr) are crucial for these magnets, especially in high-performance applications.
Meanwhile, ministry officials said that said 30 automotive firms have sought authorisation from the Directorate General of Foreign Trade (DGFT) to import rare earth magnets from China a fortnight ago, so that production is not impacted negatively due to the shortage.