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The Union Cabinet has approved a new incentive scheme for rare earth permanent magnets in its meeting on Wednesday. An allocation of approximately Rs 7,280 crore is proposed for this scheme, nearly three times the earlier estimated package of Rs 2,500 crore. This move comes at a time when China has tightened export controls. China controls 60-70% of global rare earth raw materials and 90% of processing.
Government's major move on rare earth metals
New Delhi: The Union Cabinet on Wednesday approved four major projects worth a total of Rs 19,919 crore to boost infrastructure and industrial development. This includes a Rs 7,280 crore rare earth permanent magnet manufacturing scheme, considered crucial for electric vehicles and the defense sector. Additionally, Rs 9,858 crore has been allocated for the Pune Metro expansion, Rs 1,457 crore for the doubling of the Devbhoomi Dwarka (Okha)-Kanalas railway line, and Rs 1,324 crore for the Badlapur-Karjat third and fourth railway lines.
Rs 7,280 crore for the Rare Earth Permanent Magnet Scheme
The Union Cabinet has approved a new incentive scheme for rare earth permanent magnets in its meeting on Wednesday. An allocation of approximately Rs 7,280 crore is proposed for this scheme, nearly three times the earlier estimated package of Rs 2,500 crore. This move comes at a time when China has tightened export controls. China controls 60-70% of global rare earth raw materials and 90% of processing.
Why is this scheme significant?
The central government has approved a first-of-its-kind scheme to promote the production of Rare Earth Permanent Magnets (REPM). The scheme aims to develop integrated manufacturing facilities for the production of sintered REPM, which will involve the conversion of rare earth oxides into metals, metals into alloys, and finally alloys into finished magnets.
The scheme will entail an investment of approximately Rs 7,200 crore. This will involve creating a capacity of 1,000 metric tonnes per annum (MTPA) and setting up units with a capacity of 1,200 MTPA. The scheme will span a total of 7 years, with 2 years allocated for setting up a manufacturing unit.
These elements play a crucial role in electric vehicles, renewable energy, and defense production
Rare earth elements are used in electric vehicles, renewable energy, and defense production. In India, this sector still faces challenges such as limited funding, a lack of technical expertise, and long project timelines. Commercial production is currently not feasible without government support. Furthermore, the environmental risks associated with mining further complicate the sector.
China's Pressure and India's Strategy
According to a Bloomberg report, China has issued preliminary licenses for the export of rare earth magnets for use in India, but no licenses have yet been granted to Indian companies.
India's annual demand is approximately 2,000 tons of oxide, and several global suppliers are interested in meeting this demand. The government is funding studies on synchronous reluctance motors to reduce the country's dependence on foreign imports of rare earth elements in the future.
India working to develop a supply chain for rare earths
India has accelerated the development of a rare earth magnet supply chain after China tightened export controls in April. Amid trade tensions between China and the US, China has used these 17 critical elements as a strategic weapon.
Prime Minister Narendra Modi warned in July that critical minerals should not be weaponized and that a stable, diversified supply chain should be ensured. In fiscal year 2023-24, India imported 2,270 tonnes of rare earth metals and compounds, an increase of nearly 17% from the previous year. More than 65% of these supplies came from China.
