NEW DELHI: Reliance Industries, Sona Comstar, Vedanta, Larsen & Toubro, and Japan's Proterial were among the companies that joined discussions with the government on Tuesday over the $780-million rare earth magnet manufacturing scheme, according to an executive who was part of the consultations.
The government hosted the pre-bid consultation at the India Habitat Centre in the national capital to address prospective bidders' queries and concerns regarding the scheme, which aims to localize the production of rare earth magnets critical for automobile, defence, electronics and wind energy sectors, among others.
The scheme received the Union Cabinet's assent on 26 November last year, following which interested parties have begun consultations with the government. The scheme’s target is to create a magnet making capacity of 6,000 tonnes per annum in India.
"The government's benchmark is that ₹1,000 crore investment will be needed for 1,200 tonnes of magnet making capacity. There are concerns around matching pricing of Chinese magnet imports. During discussions, it was conveyed that some protection will be needed from Chinese imports. Moreover, the government has to back serious players instead of letting some undercut on the basis of pricing," the executive cited earlier said on the condition of anonymity.
"We welcome the ministry of heavy industries' forward-looking scheme to promote rare earth permanent magnet manufacturing, a crucial component for industries like EV, aerospace, defence, and consumer electronics. We are assessing the opportunity as this initiative aligns with our focus on critical minerals and presents a horizontal expansion opportunity" a Vedanta spokesperson said.
Queries emailed to the ministry of heavy industries, Reliance Industries, Proterial, Sona Comstar, and Larsen & Toubro did not elicit an immediate response.
The scheme will provide capital incentives worth ₹750 crore to five rare earth magnet-making plants to be constructed in two years, followed by sales-linked incentives worth ₹6,530 crore for five years after that.
The scheme was designed to reduce India's dependence on China for rare earth magnets. China controls about 60% of the world's rare earth mining and 90% of the world's rare earth processing capacity.
India's incentive scheme took shape after China halted exports of rare earth magnets in April 2025 amid a tariff war against the US.
Government officials briefed potential participants on the scheme’s contours, key RFP (request for proposal) provisions, and bidding procedures, while also addressing queries raised by prospective bidders, the heavy industries ministry said in a statement on Tuesday.
Abhay Tilak, a Pune-based economist and director of the Indian School of Political Economy, said that assembling appropriate technology – including machines and equipment – is integral to developing rare earth magnet making capacity.
The build-up towards India’s rare earth magnet incentive scheme comes at a time when the Centre, in the FY27 Union Budget, announced the creation of four rare earth corridors in Andhra Pradesh, Keralam, Tamil Nadu, and Odisha.
Under this scheme, The raw material required—rare earth oxides—will be supplied to the three lowest bidders by the only rare earth miner in the country, state-run India Rare Earths Ltd (Irel).
Following these consultations, interested companies will be able to bid for magnet-making capacity in the range of 600-1,200 tonnes, according to the global tender floated by the scheme's project management agency, Industrial Finance Corporation of India (IFCI).
Key features of the selection process include fulfilment of the eligibility criteria, submission of a detailed project report (DPR) as per format provided in the request for proposals floated on 20 March, and the least cost system (LCS)-based selection for technically qualified bidders, the ministry said in its statement.
Technical bids will be opened on 29 May, and bidders will have to pay ₹4.5 lakh as tender fee and ₹1 crore as earnest money deposit.
All bidders must also submit a performance bank guarantee of ₹20-40 crore, proportionate to the capacity they will develop, as per the scheme's guidelines.
The government has also said beneficiaries must invest ₹300-600 crore in two years, depending on the capacity they have been allocated.
The sales incentive will be calculated as the kilograms of magnets sold multiplied by the bidder’s quoted incentive (price per kilo) in its financial bid, capped at ₹2,150 per kg. The sales-linked incentive will be capped at 40% of the net sales turnover of these magnets.