Cabinet approves ₹7,280 crore scheme to promote manufacturing of rare earth magnets — All we know

The Union cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved a ₹7,280 crore scheme aimed at promoting the manufacture of rare earth permanent magnets (REPM).

This is a “first-of-its-kind” initiative by the central government to promote REPM ecosystem, “enhancing self-reliance and positioning India as a key player in the global REPM market”, the government said in a statement.

Mint was the first to report last week that the finance ministry’s expenditure finance committee (EFC) had approved the ₹7,300 crore production-linked incentives (PLI) scheme, setting the stage for cabinet clearance.

Minister of information and broadcasting Ashwini Vaishnaw told reporters that the REPM scheme was drawn along the lines of India's semiconductor mission.

He said incentives under this scheme would allow India to become self-reliant in rare earth magnet manufacturing in the next three to four years. “This is a very important strategic decision. It will create a completely integrated manufacturing ecosystem.”

India’s annual demand for these magnets is about 4,000-5,000 tonnes, Vaishnaw said.

Rare earth permanent magnets are foundational to electric motors and high-efficiency systems, and the establishment of a domestic, integrated manufacturing base will significantly strengthen India’s technological competitiveness, experts said.

Rare earth deposits, called ‘placer deposits’, are found along beaches, and India is among the top three countries for such deposits, Vaishnaw said. “India has 6.9 million tonnes of rare earth deposits.”

Union heavy industries and steel minister H.D. Kumaraswamy, in a statement, clarified that the scheme would provide ₹750 crore to five selected participants as capital subsidy. The government would also provide ₹6,450 crore as a sales-linked incentive for these magnet makers over a five-year period after manufacturing units are set up.

The scheme will follow a “whole-of-government” approach, working alongside the semiconductor mission and the national critical minerals mission to build a resilient supply chain, Vaishnaw said.

Both public and private sector companies will be eligible to participate. Companies from electronics, automobiles, and steel have shown interest. “The companies which will receive incentives will be decided transparently. And they will decide where they would set up manufacturing plants,” he said.

“This is a strategic sector. We have to be present in it. A lot of the manufacturing will come to halt if we are not here,” Vaishnaw said, pointing to rare earths emerging as a key factor in recent US-China negotiations.

“That is why India needs to enter this domain, as it has one of the biggest reserves of rare earths,” said Vaishnaw.

Addressing environmental concerns, the minister stated that the highest environmental management standards would be adhered to, and that the industry is well-equipped to handle waste from rare earth processing.

Industry welcomes move

“This initiative is a significant step toward building a resilient and stable supply chain, particularly for components and sub-assemblies essential for the production of electrified vehicles," said Shailesh Chandra, president of auto industry body Society of Indian Automobile Manufacturers (Siam).

The scheme is expected to accelerate clean mobility adoption, reduce dependence on crude oil imports and strengthen India’s energy security, he said.

“This is a strategic and forward-looking intervention that addresses one of the most critical gaps in the EV and advanced mobility ecosystem,” said Vikrampati Singhania, president of the Automotive Component Manufacturers of India (ACMA).

Rare earth permanent magnets are foundational to electric motors and high-efficiency systems, and the establishment of a domestic, integrated manufacturing base will significantly strengthen India’s technological competitiveness, said Singhania.

These are critical to the automotive value chain, particularly for electric drivetrains, motors, sensors, and advanced electronics, and are equally vital for renewable energy, aerospace, defence and industrial applications. India’s current dependence on imports for these magnets has long been a strategic vulnerability.

"This initiative will not only reduce import dependence but also provide long-term resilience to the automotive supply chain, encourage investments in advanced materials, and position India strongly in global value chains for EVs and clean energy," said Singhania of ACMA.

"The announcement of incentives for rare-earth magnets, along with allocations in National Critical Minerals Mission signal a broader national commitment to building a secure, competitive critical-minerals ecosystem," said Raju Kumar, partner and energy tax leader, EY India. “The proposed support for magnet manufacturing, a segment where India has historically depended on global supply chains, can unlock new opportunities across mining, processing, alloying and advanced materials.”

It creates headroom for Indian companies to participate in high-value applications spanning electric mobility, renewables, electronics and defence, Kumar added.

The real test now would be "disciplined implementation", by ensuring access to technology, developing high-quality processing capability, building responsible mining practices and maintaining ESG safeguards. "If executed well, this initiative can help strengthening India’s long-term energy-transition and manufacturing competitiveness,” he said.

“The real bottleneck is not the availability of rare earth ores. It is the absence of refining, separation, alloy-making and magnet production capabilities, a space where China holds a more than 85% global market share,” said Anupam Kumar, co-founder and CEO of MiniMines, a battery recycling company.

Battery recycling is one of the methods to collect lithium and other critical minerals from used batteries.

“By supporting domestic manufacturing across these stages, this scheme strengthens supply-chain security and begins to rebuild capabilities India has not had since the 1990s. It will accelerate innovation, draw investments into recycling and advanced materials, and create opportunities for home-grown clean-tech and mobility companies,” the MiniMines CEO said.

Global trends indicate that many countries are actively working towards diversifying rare earth supply chains, said Mrunali Tembhurne, associate fellow at The Energy and Resources Institute (Teri). “Chinese export controls on products and technology in the rare earth sector led to panic in manufacturing across the globe. Indian automotive manufacturers, for instance, faced critical supply challenges a few months ago due to China’s tightened export controls on rare earth magnets and related products,” she said.

The continued use of rare earth materials alongside advances in alternative technologies will likely define the evolving landscape of electric motor designs, said Tembhurne. “While manufacturers worldwide are evaluating the use of rare earth-free technologies, such as ferrite motors in electric vehicles, these will coexist with, rather than fully replace, rare earth-based products critical in multiple sectors, at least in the near to medium term,” she said.

Centre's REPM scheme: Top 5 highlights

• The Cabinet today approved the ‘Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets’ with a financial outlay of ₹7,280 crore. This comprises sales-linked incentives of ₹6,450 crore on REPM sales for five years, and capital subsidy of ₹750 crore for setting up an aggregate of 6,000 MTPA of REPM manufacturing facilities. Union heavy industries and steel minister HD Kumaraswamy clarified the ₹750 crore capital subsidy will be given to five selected participants.
• It envisions allocating the total capacity to five beneficiaries through a global competitive bidding process. Each beneficiary will be allotted up to 1,200 MTPA of capacity.

• Total scheme duration will be seven years from the date of award, including a two-year gestation period for setting up an integrated REPM manufacturing facility, and five years for incentive disbursement on the sale of REPM.
• It comes amid growing demand from EVs, renewable energy, industrial applications, and consumer electronics, wherein India's consumption of REPMs is expected to double by 2030 from 2025.
• At present, India's demand for REPMs is met primarily through imports. This initiative will enable the country to establish its first-ever integrated REPM manufacturing facilities, generating employment, strengthening self-reliance and advancing the nation's commitment to achieve Net Zero by 2070.