China's Export Curbs Threaten India's Rare Earth Minerals Manufacturing Scheme

India's ambitious Rs 7,300 crore (£6.2 billion) incentive programme aimed at boosting domestic production of rare earth minerals and magnets faces significant roadblocks amid the latest export restrictions on essential processing equipment and manufacturing technology from China, says a report by Economic Times. The programme, designed to reduce India's dependence on imports for materials vital to high-technology industries, may struggle to achieve its objectives as alternative sources prove prohibitively expensive, according to senior industry officials.

Alternatives at Premium Prices

Whilst countries including Germany and Japan possess the necessary technology and equipment for processing rare earth materials, their offerings cost substantially more than Chinese alternatives, industry executives were quoted as saying by ET. China currently dominates the global rare earth materials and extraction equipment markets.

According to the International Energy Agency, China controls 61 per cent of worldwide rare earth production and a staggering 92 per cent of processing capacity. Rare earth magnets serve as essential components in electric vehicles, consumer electronics, wind turbines and industrial machinery.

"China's commerce ministry has issued a notification extending export controls also to rare earth production and processing equipment, and rare earth raw and auxiliary materials," a senior automotive industry executive was quoted as saying who requested anonymity.

"This may impact the new scheme the Centre has announced to incentivise local manufacturing of rare earth magnets," the executive added.

Beijing Tightens Grip on Critical Minerals Supply Chain

According to an announcement from China's Bureau of Security and Control earlier this month, export controls will apply to rare earth production and processing equipment, including "centrifugal extraction equipment for rare earth processing; intelligent continuous impurity-removal and precipitation equipment for ionic rare earth ores".

Companies seeking to export these items must now apply for a licence and declare whether products are "dual-use controlled" – meaning they have both civilian and military applications.

"While the (Indian) government has been working on plans to attain self-sufficiency in rare earth magnet production, the challenge is the technology and the equipment are also controlled by China," a second industry executive explained. Procuring equipment from Germany and Japan would significantly increase costs and undermine project viability, he noted.

Govt. Scheme Awaits Cabinet Approval

Earlier this month, the Expenditure Finance Committee approved the incentive scheme, which proposes providing both capital and operational expenditure support to firms establishing rare earth magnet processing facilities and supply chains in India. The programme allocates Rs 6,500 crore for capital expenditure and Rs 800 crore for operational expenditure. The scheme is expected to receive Cabinet approval shortly.

Trade War Escalates Rare Earth Restrictions

China's latest restrictions build upon export controls Beijing implemented on 4 April covering medium and heavy rare earth-related items, ostensibly to "safeguarding national security". Those measures came in response to US President Donald Trump's reciprocal tariffs.

Under the 4 April notification, exporters must obtain a licence from China's commerce department after securing an end-user certificate from purchasers confirming the items will not be utilised for storing, manufacturing, producing or processing weapons of mass destruction and their delivery systems.