₹7,000 crore! Centre plans to boost its made-in-India rare earth plan amid growing pressure from China, says report

Amid constant restrictions from China, India is planning to nearly triple the size of its incentive programme to manufacture rare earth domestically, a Bloomberg report said on Saturday.

Citing people with knowledge on the matter, the report said that the incentive for the rare earth manufacturing scheme will be increased to around ₹7,000 crore ($788 million), as China continues to dominate the sector. This is a significant increase from the earlier $290 million funds the government had mulled earmarking for the rare earth manufacturing.

The proposal is awaiting cabinet approval, and will be a booster for India's current quest to secure critical materials for electric vehicles, renewable energy and defence.

The report comes weeks after China tightened its grip on rare earth export significantly, adding five new rare earth elements to its restricted export list. China now has 12 critical rare earths with export restrictions.

How does India plan to spur domestic rare earth production?

Prime Minister Narendra Modi had earlier this year called for a stable, diversified global supply chain, while warning against weaponising critical minerals amid growing concerns on China.

However, India faces challenges as limited expertise, long timeline for projects and an apparent shortage of funds delays rare earth production.

State-owned companies, according to Bloomberg, are leading the effort to secure overseas mining partnerships as domestic rare earth manufacture dwells on early phases.

Moreover, the challenge persists as the technological expertise to extract rare earth mineral is heavily concentrated in China.

The government initiative will support about five companies through a mix of production-linked and capital subsidies, according to the report. It further said that China has recently issued the first licenses allowing imports of rare earth magnets for use in India. However, none of these licenses have been granted to Indian-origin companies.

The government is also funding studies on the so-called synchronous reluctance motors, a technology that could eventually reduce dependence on rare earth materials, according to the people.

India following global approach

If the report proves to be true, it would signal that India is following footsteps of countries including European Union nations that have called for lesser dependence on China in terms of rare earth.

India's rare earth expansion plan aligns with global efforts to reduce reliance on China.

EU would seek to speed up critical raw materials partnerships with countries such as Australia, Canada, Chile, Greenland, Kazakhstan, Uzbekistan and Ukraine, European Commission chief Ursula Von Der Leyen had said earlier last month.

Earlier this year, Japan had also said it would reduce rare earth dependence on China.

Meanwhile, the US reached a rare earth export deal with China in exchange of lowering tariffs to 47%.