The Indian government is preparing to launch a Rs 13.5 billion incentive scheme to promote the domestic production of rare earth magnets, in a move aimed at reducing the country’s reliance on Chinese imports, according to official sources.

The proposed scheme, expected to run for seven years, will support the creation of a local supply chain for rare earth magnets—critical components used in electric vehicles, electronics, and defence equipment. Subsidy levels are still being finalised, with industry proposals ranging from 30 to 50 per cent support. The final subsidy structure will influence the scheme’s total fiscal impact.

A concept note for the initiative has been circulated by the Ministry of Heavy Industries to key departments including the Ministry of Mines, Ministry of Finance, Department of Atomic Energy, and NITI Aayog. The plan gains urgency following China’s recent export restrictions on rare earths, which raised global supply chain concerns.

Officials believe the Rs 13.5 billion allocation will be adequate to establish processing and manufacturing capacity, with industry feedback indicating that it will take two years to set up processing plants, and Indian-made magnets could be available within three years.

Despite possessing 6.9 million metric tonnes of rare earth reserves, India mined only 2,900 tonnes in 2024, while imports reached 53,000 metric tonnes in FY25. State-run IREL remains the sole entity currently engaged in mining and refining rare earths in India.

At least five to six companies have expressed interest in magnet manufacturing, including major importer Sona Comstar and Midwest Advanced Materials, which has committed to producing 500 tonnes by end-2025 and scaling up to 5,000 tonnes in 2026.

The scheme is part of India’s broader effort to develop strategic mineral capacity, enhance self-reliance, and diversify critical supply chains in high-tech sectors.