India Plans ₹5,000 Crore Incentive Scheme to Boost Domestic Rare Earth Magnet Production

India is preparing to launch a production-linked incentive (PLI) scheme worth between ₹3,500 crore and ₹5,000 crore to promote the domestic manufacturing of rare earth minerals and derived magnets. According to a report by The Economic Times, the scheme is expected to be notified within the next 15 days and will mark a critical step toward reducing the country’s reliance on Chinese imports in this strategically important sector.

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The scheme, designed to fast-track domestic production of rare earth-based components, is expected to follow a reverse auction model. Under this system, eligible firms will compete by offering the most cost-efficient proposals, with fiscal incentives awarded accordingly. According to sources cited in the report, at least five prominent Indian firms have shown interest in participating. These include two major conglomerates—Jindal and Vedanta—auto component supplier Sona Comstar, Hyderabad-based Midwest (owned by the Kollareddy family), and one undisclosed company.

The policy initiative follows an internal ministerial review that flagged the urgent need for diversification of supply sources. The trigger for renewed urgency was China’s abrupt move on April 4 to tighten exports of rare earth magnets, which disrupted global supply chains and raised alarm among high-tech manufacturers and EV makers.

Also Read: India Halts Rare Earth Exports To Japan, Amid Severe Crisis Due To China

China currently controls around 90% of the global rare earth magnet market, giving it disproportionate influence over critical global industries such as electric mobility, defence, and renewable energy. Indian automakers—including Tata Motors, Maruti Suzuki, and Bajaj Auto—have reportedly warned that production may face significant disruptions as early as July unless magnet imports resume at scale.

In response to the evolving situation, India has taken several steps to secure magnet supplies. These include issuing End User Certificates for magnet imports from China, sending government delegations to Beijing to expedite pending export approvals, and placing a temporary hold on exports of domestically mined rare earths to countries like Japan. The aim is to redirect strategic reserves toward domestic consumption in priority sectors.

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India holds an estimated 6.9 million tonnes of rare earth reserves—the fifth-largest globally. However, its refining and processing infrastructure remains underdeveloped. Most of the country’s rare earth output is currently handled by state-owned Indian Rare Earths Limited (IREL), which supplies materials primarily for the atomic energy and defence sectors. Commercial-grade demand continues to be met largely through imports, particularly from China.

IREL operates a refining capacity of approximately 600,000 tonnes per annum and produces key minerals such as ilmenite, rutile, zircon, sillimanite, and garnet. The company also manages a Rare Earth Extraction Plant in Chatrapur, Odisha and a Rare Earth Refining Unit in Aluva, Kerala. Despite these assets, India lacks commercial-scale magnet production capabilities, leaving a critical gap in the domestic supply chain for electric vehicles and advanced electronics.