Centre eyes big rare earth push with Rs 1,345-crore incentive scheme

New Delhi: The Union government will soon come out with a Rs 1,345-crore financial incentive scheme to boost domestic manufacturing of rare earth magnets as Chinese supply curbs threaten to disrupt industrial production, especially in the auto sector, Union Minister for Heavy Industries H D Kumaraswamy said on Friday.

Speaking at a media conference, Kumaraswamy said the proposal is currently under inter-ministerial consultation. After the completion of the inter-ministerial consultation it will be sent to the Union Cabinet for approval.

“It is proposed that there will be two manufacturers as of now, however this could change by the time the scheme is ready,” the minister said.

According to the proposed scheme, the government would provide end-to-end support to the selected companies for conversion of rare earth oxides into rare earth magnets, which are important elements for several industrial productions, especially electric vehicles and other green energy products.

China’s curbs on exports of rare earth magnets has negatively impacted auto production in India. China, which enjoys near monopoly in the sector controlling over 90% of global processing capacity for rare earth magnets, has put restrictions on its exports amid escalation in global trade war triggered by US President Donald Trump’s tariff policies.

Rare earth mining in the country is managed by IREL (India) Ltd, formerly Indian Rare Earths Ltd, which functions under the administrative control of the Department of Atomic Energy.

According to the US Geological Survey data, India holds the third largest deposits of rare earth elements with an estimated 6.9 million tonnes. China has the largest deposit estimated at 44 million tonnes. While the rare earth mines are spread in different countries, the vast majority of it is being processed in China.

According to official sources, Mahindra & Mahindra and auto parts maker Uno Minda and Sona Comstar have shown interest in the production of rare earth magnets. These firms are likely to be among the front runners when the government invites bids following the approval of the proposed scheme from the union cabinet.

IREL produced nearly 2,900 tonnes of rare earth ore in 2024. Most of it was used for nuclear and defence needs, while a portion was exported to Japan.

Last month, IREL suspended the rare earth ore export to Japan following the disruption in supplies from China.