Govt. Greenlights ₹7,280 Crore Scheme to Manufacture Rare Earth Permanent Magnets

In a push to secure India's supplies of rare earth magnets, the Cabinet on Wednesday approved a novel scheme, with a financial outlay of ₹7,280 crore, to manufacture Rare Earth Permanent Magnets (REPM) locally in India. The approval of this scheme, named the "Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets'" comes two days after Commerce Minister Piyush Goyal noted that one of the areas in which India and Canada have "tremendous potential" to cooperate on was in critical minerals. 

Production Capacity

"This first-of-its-kind initiative aims to establish 6,000 metric tonnes per annum (MTPA) of integrated Rare Earth Permanent Magnet (REPM) manufacturing in India, thereby enhancing self-reliance and positioning India as a key player in the global REPM market," said in a media release following the Union Cabinet's decision.

Use Across Multiple Sectors

REPMs are vital components that are used in electric vehicles (EVs), renewable energy, electronics, aerospace, and defence sectors. According to the Union Cabinet, the scheme will support the creation of integrated REPM manufacturing facilities, involving the conversion of rare earth oxides to metals, metals to alloys, and alloys to finished REPMs.

Industry Highlights Supply Chain Benefits

“The Indian Automobile industry welcomes the government of India’s newly announced scheme to promote the domestic manufacturing of Rare Earth permanent magnets, with an allocated outlay of ₹7,280 crore. 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," Shailesh Chandra, President, SIAM, said in a statement.

"The recent announcement of incentives for rare-earth magnets, alongside strategic allocations under the National Critical Minerals Mission, marks a pivotal moment for India’s industrial self-reliance. This isn't just a policy move; it signals a clear national commitment to forging a secure and competitive critical-minerals ecosystem," said Saurabh Agarwal, Partner & Automotive Tax Leader, EY.

"By proactively supporting magnet manufacturing—a sector historically reliant on global supply chains—we are unlocking substantial new opportunities. This spans the entire value chain: from responsible mining and processing to advanced alloying and materials development. The real measure of success now rests on disciplined implementation. We must prioritise technology access, establish high-quality processing capabilities, and strictly uphold responsible mining and ESG standards. Executed well, this initiative will profoundly strengthen India's long-term energy transition and manufacturing competitiveness."

“VECV welcomes the Cabinet’s approval of the ₹7,280 crore Rare Earth Permanent Magnet (REPM) manufacturing scheme. Rare earth magnets are vital for electric drivetrains, power electronics, and high-efficiency systems that will increasingly support the commercial vehicle industry’s shift towards cleaner and more energy-efficient technologies," said Vinod Aggarwal, MD & CEO, VE Commercial Vehicles.

The total financial outlay of the scheme of ₹7,280 crore will comprise a sales-linked incentives of ₹6,450 crore on REPM sales for five years and a capital subsidy of ₹750 crore for the setting up of an aggregate of 6,000 MTPA of REPM manufacturing facilities.

The plan is to allocate the total capacity of 6,000 MTPA to five beneficiaries through a global competitive bidding process with each beneficiary being allotted up to 1,200 MTPA of capacity.

The total duration of the scheme is to be seven years from the date of award, including a 2-year gestation period for setting up an integrated REPM manufacturing facility, and 5 years for incentive disbursement on the sale of REPM.