Cabinet approval for ₹7,300 crore rare earth magnet scheme expected within a month

The finance ministry’s expenditure finance committee (EFC) has approved the ₹7,300 crore production-linked incentives (PLI) scheme, setting the stage for cabinet clearance, two people aware of the matter said. Mint earlier reported that several global and domestic entities including Lynas, Iluka, Rainbow, JSW and Bharat Forge had shown interest in the scheme.

“The EFC approved the proposal recently, toward the end of October," one of the two people said on the condition of anonymity. “We anticipate cabinet approval shortly, potentially even by the end of the calendar year."

The finance ministry which signs off on the programme, and the heavy industries ministry that administers it, did not respond to emails seeking comment.

The scheme was conceived in the wake of a supply crisis earlier this year when China temporarily halted exports of these magnets, rattling manufacturers globally. The initiative is designed to spur a domestic ecosystem for magnets—essential components for electric vehicles, defence systems, and renewable energy technologies. China controls roughly 60% of global rare earth mining and a commanding 90% of the refining and processing capacity.

Although the supply crunch eased, it served as a stark reminder to global policymakers and industry leaders of the need to de-risk vulnerable supply chains. The government recently advised the domestic automobile industry to explore alternatives to rare earth magnets as a long-term strategy, acknowledging the persistent geopolitical risks associated with the segment.

Abhay Tilak, director of the Indian School of Political Economy, views the PLI scheme as a pivotal experiment. “The path ahead in India is uncharted," he said. “This scheme is likely to be a pilot to test the feasibility of a complete rare earth magnet supply chain in India. We will only find the answers once it is fully implemented."

Nitin Gupta, co-founder and chief executive officer (CEO) of electronics recycling firm Attero, noted that the scheme would serve as a critical catalyst. “The incentive scheme for magnets acts as a booster, making the investment math clearer and nudging more industry players to enter this domain," he said. Attero, which sources rare earth oxides from recycling, plans to meet 75% of India’s magnet-required rare earth demand within the next two years.

The PLI scheme aims to achieve an annual domestic manufacturing capacity of 6,000 metric tons of rare earth magnets by 2030. It will offer manufacturers a financial incentive equivalent to 15% of their total investment, conditional on a minimum investment of ₹200 crore per company. The support will cover both capital expenditure (capex) and operational expenses (opex). For domestic firms, the incentives are seen as a vital mechanism to bridge the viability gap against cheaper Chinese imports.

In a concrete display of commitment, NCR-based Lohum Cleantech Pvt. Ltd announced plans on 10 November to establish a ₹500 crore rare earth magnet manufacturing facility in Uttar Pradesh, targeting a 2,000-ton annual capacity by FY28.

Pratyush Sinha, vice-president of special projects at Lohum, emphasized the economic rationale. “This support narrows the viability gap versus cheaper imports and makes it feasible for companies such as Lohum to commit multi-hundred-crore investments and cutting-edge technology to India," he said. Sinha projected that India's magnet demand is set to soar from an estimated 4,000 tons in 2025 to about 15,000 tons by 2030.

India’s magnet demand is estimated at around 4,000 tonnes in 2025 and is projected to rise sharply to about 15,000 tonnes by 2030, while more than 90% of magnets are currently imported, Sinha said. "Without a focused scheme, this dependence will only deepen, exposing Indian manufacturers to price shocks and supply disruptions," he added.

India holds approximately 7.23 million metric tons of rare earth oxides, largely concentrated along its coastal regions in states like Andhra Pradesh, Odisha, Kerala, and Tamil Nadu. However, building the processing capacity remains a complex challenge.

China’s dominance was solidified over decades by tolerating the massive environmental and public health impacts associated with rare earth processing. A 2014 analysis by Guardian estimated that producing one ton of finished magnets could generate around 2,000 tons of toxic waste, a factor that deterred Western nations from establishing domestic processing facilities. More recent studies do not quantify the toxic waste, but confirm that exposure to rare earth elements, their ores, and to processing of these elements can be damaging.