Centre preparing incentives to encourage domestic production of rare earth magnets: H D Kumaraswamy

New Delhi: The government is preparing fiscal incentives to encourage domestic production of rare earth magnets in the face of recent disruptions caused in their supply, currently dominated by China, Union Minister H D Kumaraswamy said on Friday.

The minister for Heavy Industries and Steel also said a scheme is in the works to provide "targeted support" to the industry for its capital as well as operational expenditure, which would help bridge cost gaps, offer relief from high tariffs on key equipment and ensure continuity of supply in the face of rising global restrictions.

"The ministry is actively addressing vulnerabilities in critical raw materials. Recognising that rare earth magnets are central to EV motors and currently dominated by Chinese supply, we are preparing fiscal incentives to encourage domestic production.

"We are working on a scheme aimed at powering India's participation in global value chains through targeted support for both capital expenditure and operational expenditure requirements of the industry. This will help bridge cost gaps, offer tariff relief on key equipment and ensure continuity of supply in the face of rising global restrictions," Kumaraswamy said in a video message at ACMA's annual session.

In July, the minister had said that inter-ministerial consultations were underway for a Rs 1,345-crore scheme to subsidise production of rare earth magnets in India with two select manufacturers proposed to be given incentives.

The subsidy will facilitate investment for establishing processing facilities for companies to convert rare earth oxides into magnets. Indian Rare Earth Magnets Ltd, a PSU under Ministry of Atomic Energy, is the sole repository of rare earths in India.

China's recent restriction on exports of key metals caused widespread disruption in the manufacturing of automobiles and semiconductor chips in several countries, including India.

Rare earth magnets include neodymium-iron-boron (NdFeB). It is used for high-performance automotive applications such as traction motors in electric vehicles (two-wheelers and passenger vehicles) and power steering motors (in passenger vehicles) in both electric vehicles and internal combustion engine vehicles.