India’s push for building a domestic rare-earth permanent magnet (REPM) base will need more than just industry effort. Recent experience with the production-linked incentives (PLI) in battery manufacturing proves that the State cannot just design an incentive, hold a tender and then step away.
The battery PLI was clearly ambitious. It envisaged rapid commissioning in two years and sales-linked incentives over a five-year window. Domestic value-addition was targeted at 60 percent within these five years. The challenges were limited technology availability, a skilled-manpower gap, dependence on imported equipment and non-availability of upstream components such as cathode/anode materials and electrolyte.
The scheme tried to pull a gigafactory into existence, but the ecosystem that makes a gigafactory bankable and buildable was still to be set up.
By October 2025, only 2.8 percent of targeted capacity had been commissioned, commercial sales had not meaningfully begun and investment lagged far behind targets. The structural issue still existed: India is overwhelmingly import-dependent for the minerals that anchor the clean-tech stack. A recent assessment by Niti Aayog shows near 100 percent import dependence for lithium, nickel, cobalt and rare-earth elements—exactly the inputs that sit in batteries, electric vehicle motors and wind turbine generators.
This is the context in which we are looking at the just-announced REPM PLI scheme. It makes an improvement by explicitly targeting an integrated midstream chain and recognising raw material constraints. However, more needs to be done with government support for market-making (offtake), bankability (risk-sharing finance) and supply security (feedstock, trade and stockpiles).
The scheme notes that India imports all its sintered neodymium-iron-boron magnet because of missing midstream steps—oxide-to-metal, metal-to-alloy, alloy-to-magnet—and aims to build integrated manufacturing capacities of 6,000 million tonnes per annum. It allocates 600-1,200 MTPA to each of five potential bidders.
The scheme correctly identifies feed stock constraints, but the numbers show a gap. The notification states that the country’s existing neodymium-praseodymium oxide (NdPr) production capacity is 400 MTPA with a 500 MT stock, supporting roughly 1,500 MTPA of magnets—thus falling short of the 6,000 MTPA ambition. The scheme offers limited assured supply and the core challenge of oxide availability remains a problem that is pushed onto bidders.
The import-risk dimension is also sharper for magnets than for many other components. Trade data disclosed in Parliament shows that for permanent magnets, import dependency reached 90.4 percent in 2024-25. Bankability hates price volatility. NdPr prices have swung from triple digits to $60 a kg in 2023, traded around the low-50s in mid-2024 and then surged again in 2026. That is not a commodity cycle but a whiplash that can wipe out any financial model.
Given this, five policy actions can be game-changers.
First, the State must guarantee feedstock adequacy and a predictable oxide-to-alloy pathway. The scheme’s NdPr allocation needs a time-bound plan to expand domestic availability. The recently-announced rare earth element (REE) corridors are a welcome step, signalling intent to create integrated mining-to-processing ecosystems. Fast-tracking these corridors with plug-and-play infrastructure, streamlined approvals and clear execution timelines would be essential to unlock production.
Complement this by a national push on recycling and circularity through strictly-enforced producer responsibility and targeted incentives and penalties to ensure recovery of rare earths from end-of-life products to augment secondary feedstock supply. These measures are essential to prevent the 6,000-MTPA aspiration from collapsing into a 1,500-MTPA reality.
Second, the State moves to create bankable offtake and not just indicate an expected demand. In strategic sectors like defence, public transport and renewables, government procurement can anchor volumes. Australian and American experiences show that long-term contracts are often a prerequisite for financing new critical-mineral capacity. The REPM PLI needs a structured offtake mechanism with demand aggregation and standardised contracts, not the hope that downstream equipment suppliers will voluntarily pay any early-mover premium.
Third, the State can mitigate price volatility through risk-sharing. Price floors and stockpile-linked stabilisation can convert price uncertainty into an investable revenue curve. Other governments have explicitly used floor prices for NdPr to accelerate supply chains. India should not assume that a least-cost tender can manage a volatile commodity market with dominant global players holding concentrated supply power.
Fourth, urgently build the ecosystem of skilling, testing, standards and leverage plug-and-play industrial commons like the Petroleum, Chemicals and Petrochemicals Investment Regions at Paradeep and Dahej. China has developed more than 400 courses in processing, beneficiation and downstream manufacture. It is imperative that India sees skilling in this area as essential infrastructure and not just training. Government-backed testing and certification, along with targeted skilling, is basic industrial plumbing.
Finally, the National Critical Minerals Mission and the REE corridors adopt a welcome whole-of-government approach. This is a multi-ministry mission across the complete value chain—involving mines, atomic energy, external affairs, petroleum, coal, heavy industries, renewables, electronics & IT, finance, transport, steel, chemicals & petrochemicals, environment & forest and Niti Aayog.
Industrial policy delivery is sub-optimal when each part delivers its piece and no one owns the outcome. Magnets and batteries should be operationally nested into the Critical Minerals Mission and REE corridor architecture with one dashboard, one escalation channel, and one set of milestones that the Cabinet monitors.
If battery PLI taught us anything, it is that aggressive timelines and incentives do not substitute for capability. For India to succeed in establishing resilience in critical mineral and rare earth supply chains and downstream manufacturing, the policy paradigm must treat success as a shared responsibility and obligation. The private sector must invest, build, qualify and improve yields. The State can pull the levers that make those investments deliver outcomes: feedstock access, offtake certainty, trade policy stability, common infrastructure and credible milestone governance.
Davinder Sandhu | Co-founder and Chair at Primus Partners; former advisor to World Bank Executive Director for India, and former Director, Prime Minister’s Office
(Views are personal)