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India has nearly 6.9 million tonnes (mt) of rare earth element reserves – the third largest as per US studies – but lacks processing tech.
| Photo Credit:
cueapi
India’s efforts to develop indigenous rare earth magnet production (and also rare earth element processing) are gaining traction. Two Indian conglomerates — Jindal and Vedanta – auto-component major Sona Comstar, the Kollareddy family-owned Hyderabad-based, Midwest, and another undisclosed player — have approached Indian ministries with interest in a ₹2,500-3,000 crore ($300-360 million) fiscal incentive programme, said people familiar with the matter.
The ambitious scheme, slated for a three-to-five-year roll-out, is undergoing final refinements across government bodies before policy details are locked in, the sources said.
“Some five-odd companies have expressed initial interest for an incentive-based production scheme for rare earth magnets considering factors like acquisition of processing tech, securing raw materials and resources, finance cost, etc, in all of which China has a clear advantage,” a source told businessline.
China’s curbs
Indian EV-makers have been badly hit by China imposing curbs on export of seven rare earth elementsand magnets. Of the seven curbed elements, at least two to three are key elements in magnet-making. Supplies have stopped since April and India’s stocks – across EV-makers – are expected to last by June-end to mid-July.
Sona Comstar is amongst the largest importer and supplier of rare earth magnets in India, a key component in EV making; while Vedanta is amongst the mining major who have won rare earth element mineral blocks and are seeking tech tie-ups for processing.
India has nearly 6.9 million tonnes (mt) of rare earth element reserves – the third largest as per US studies – but lacks processing tech.
| Photo Credit: Doug Kanter
It is not clear which Jindal group entity has approached the Ministries. Amongst the entities, JSW Group has interest in EV-making.
Midwest Advanced Materials is the only entity to have secured technological collaboration (and funding) from the mini-ratna CPSE IREL (Indian Rare Earth Ltd) — the sole-maker of rare earth magnet in the country.
Vedanta refused to comment while a response from JSW is awaited till the time of this article going to press. Sona Comstar has re-applied for seeking permission for import of rare earth magnets (through MEA and Chinese Embassy in India). And Midwest Advanced Material is expected to start production later this year and has reportedly secured mines in Sri Lanka.
Attero, an e-waste recycling company, will also be scaling up of its rare earth element recycling capacity to 30,000 tonnes from existing 300 tonnes, over the next 12 to 24 months by investing ₹100 crore.
Incentive Scheme
At a meeting held earlier this week, the need for pushing forward an incentive-backed production scheme was discussed.
India has nearly 6.9 million tonnes (mt) of rare earth element reserves – the third largest as per US studies – but lacks processing tech. This makes it rely on imports – nearly 3600 tonnes of magnets and around 870 tonnes by the automakers. In comparison, China continues to control 50 per cent of the mining, 70 per cent processing; and 90 per cent of the supply chain.
The proposed incentive scheme with a ₹2,500-3,000 odd crore outlay will have a 2-5 year gestation period and incentives to be stretched thereafter over another 5–odd years (in tranches). Incentives are to be spread out as a percentage of the sale value. Import duty exemptions are also being explored. Domestic value addition will be prioritised.
Draft plans discussed include a seven-year incentive programme that will take up magnet production to nearly 4000 mt . Organisations that will be supported need to use locally produced rare earth oxide or NdPr Oxide (in industrial terms). Eligibility criteria will be only when manufacturers seeking annual production in 500 mt multiples.
It has been proposed, in the first year (when products the market), the incentive will be 30 per cent of the sale value, in second year it will be 27 per cent; in year-three it will 25 per cent, the next one it will be brought down to 20-22 per cent and to less than 20 per cent in the last year (year 5).
“The scheme is under discussion and details are being worked out in consultation with other ministries,” a second source said.
Cost disadvantage for India
The incentive scheme is pushed considering India’s continued manufacturing cost disadvantage. Overall cost works out to be $ 57 per kg for rare earth magnets, in India; higher by 10-odd per cent against $52 per kg for China.
For instance, in case of neodymium (Nd) and praseodymium (Pr) sourcing – and conversion cost – which are combined together to make permanent magnets – China as a 9 per cent cost advantage because of incentives. China can secure the metals at $22 per kg, against $29 per kg in India. This accounts for 42 per cent of the final product cost in China, against 51 per cent in India.
Similarly, China has zero technology transfer or procurement cost; whereas for India, it would account for at least 3-5 per cent of the end offering cost. China has subsidised debt servicing charges too, thereby bringing down finance costs at $2.5per kg (apprx 5 per cent) as against India, where it would be $6 per kg (11 per cent of end product cost), putting the subcontinent at a 6 per cent price differential disadvantage.
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Published on June 19, 2025
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