Centre Approves ₹7,280-Crore Incentive Scheme for Rare Earth Magnet Manufacturing

The central government has approved an incentive programme for large-scale manufacturing of rare earth permanent magnets. The scheme, valued at ₹7,280 crore, is designed to support extraction, processing, and magnet manufacturing within India.

It aims to reduce dependence on imports and build a domestic supply chain for critical components used in electric vehicles and electronics. The decision follows recent export restrictions by China, which disrupted supplies for several Indian EV manufacturers.

Role of Rare Earth Magnets in EVs

Rare earth magnets are essential for modern electronics and automotive applications. In conventional internal combustion engine vehicles, they are used in components such as electric steering motors and wiper systems.

For electric vehicles, they are critical for Permanent Magnet Synchronous Motors, which deliver high torque, improve efficiency, and maintain compact designs. These characteristics make rare earth magnets fundamental to electric powertrains.

Scheme Details and Implementation

The incentive programme will be implemented through a production-linked incentive (PLI)-style framework. Approved companies will receive subsidies based on production, localisation, investment, and technological capability.

The first two years will focus on setting up integrated facilities, followed by five years of sales-linked incentives. Up to five companies will be selected through global bidding to establish a combined annual manufacturing capacity of 6,000 tonnes of rare earth magnets.

Industry Context and Challenges

China currently produces 90% of the world’s rare earth magnets and controls 70% of processing capacity. India’s EV industry has faced supply chain disruptions due to China’s recent export curbs.

While the new scheme addresses magnet availability, the sector continues to rely on imported lithium-ion cells, which contribute to high vehicle costs. In FY2025, EV market growth slowed to 17% year-on-year compared to 42% in FY2024, highlighting ongoing challenges.

Resource Availability and Recycling

India has reserves of nearly six million tonnes of rare earth minerals, among the largest globally. The government’s National Critical Mineral Mission, launched earlier this year, promotes responsible mining and incentivises recycling from sources such as e-waste and spent magnets.

Recycling firms like Attero are expected to benefit from the new scheme, as increased manufacturing will generate more recoverable material. Attero holds 47 global patents for rare earth and lithium recovery technologies.

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Conclusion

The cabinet-approved incentive scheme aims to establish India as a hub for rare earth magnet manufacturing. By creating a domestic supply chain, the programme seeks to reduce reliance on imports and strengthen the EV ecosystem. The initiative complements ongoing efforts to develop lithium-ion cell production and critical mineral recycling. Implementation of the scheme is expected to support India’s long-term electric mobility and electronics manufacturing goals.

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