Will it reduce dependence on China?

The scheme targets the establishment of five greenfield manufacturing plants, each with an annual capacity of 1,200 tonnes, collectively producing 6,000 tonnes of magnets per year In a landmark decision aimed at reducing India’s heavy dependence on China for critical materials, the Union Cabinet has approved a Rs 7,280-crore Production-Linked Incentive (PLI) scheme for the domestic manufacture of sintered rare-earth permanent magnets. These high-performance magnets are indispensable components in electric vehicle motors, wind turbines, defense missile guidance systems, smartphones, MRI machines, and a host of other modern technologies.

The scheme targets the establishment of five greenfield manufacturing plants, each with an annual capacity of 1,200 tonnes, collectively producing 6,000 tonnes of magnets per year. The seven-year program allocates two years for plant construction followed by five years of production-linked incentives. Industry experts hailed the move as a significant step toward securing supply chains for electric vehicles, renewable energy, and electronics.

India currently imports nearly 55,000 metric tonnes of rare-earth elements annually, with approximately 65% sourced from China. Beijing not only dominates 70% of global rare-earth mining but also controls 90% of the world’s processing and refining capacity. China has repeatedly weaponised this near-monopoly, imposing export restrictions during geopolitical tensions, most recently in April and October 2025.

Despite possessing the world’s fifth-largest rare-earth reserves, India accounts for less than 1% of global production. Experts attribute this gap to limited private-sector participation, outdated technology, regulatory hurdles, environmental concerns linked to radioactive monazite processing, and historically low domestic demand.

Bridging the critical gap

The new PLI scheme focuses on the “midstream” segment – converting rare-earth oxides into metals, alloys, and finally high-strength sintered magnets – which has been the missing link in India’s value chain. Panelists on a widely watched television discussion emphasized that past attempts to build a domestic magnet ecosystem faltered primarily due to a 20–40% price disability compared with Chinese products .

A senior official at Ernst Yong India Ernst& Young India, described the scheme as a hybrid model combining capital subsidies with sales-linked incentives, supplemented by likely state-level packages and potential exemptions on customs duty for imported capital goods. He appreciated the interest from Industry, citing a surge in queries since the scheme’s announcement.

A senior member at the Council on Energy, Environment and Water (CEEW), called the target “highly ambitious.” He pointed out that China alone produces around 240,000 tonnes of rare-earth magnets annually against India’s planned 6,000 tonnes. He pointed out that most countries, including India, still lack the specialized know-how and skilled workforce for magnet production, warning that stabilizing production lines could take longer than the allocated two years.

Another senior member of the Automotive Component Manufacturers Association of India (ACMA), underlined the auto sector’s acute vulnerability. He mentioned that even magnets costing less than a dollar can halt an entire vehicle assembly line, referencing the severe disruptions caused by China’s recent export licensing regime, where only a handful of the 50-plus applicant companies received approvals.

Sarda Mohanty, Chairman and Managing Director of Indian Rare Earths Limited (IREL), revealed that India possesses untapped resources, including a deposit in Amadongar (Gujarat–Rajasthan) containing 1.14 million tonnes of rare-earth oxides – enough to meet domestic magnet needs for a decade. He expressed confidence that, with recent exemptions from public hearings and other regulatory fast-tracking, the upstream ecosystem could be ramped up within three years. 

A former diplomat stressed the need for international technology partnerships with Japan, Australia, and select Western nations, while simultaneously investing heavily in indigenous R&D. He cautioned that China will not transfer this technology voluntarily. Experts unanimously agreed that the magnet PLI is only one piece of a larger puzzle.

A comprehensive approach must include accelerated mining reforms, enhanced refining and separation capabilities, robust recycling frameworks, and continued exploration of magnet-free motor technologies for certain applications. As one of the mentioned, the next seven years will determine whether India can transform its resource wealth and policy ambition into genuine strategic autonomy and global competitiveness in one of the most critical technology supply chains of the 21st century.