India’s new push for rare earth self-reliance

India is launching a ₹1,000 crore scheme to produce rare earth magnets domestically, reducing dependence on Chinese imports. Rare earth magnets are vital components in industries such as electronics, electric vehicles (EVs), and wind energy. Despite having vast reserves, India lacks advanced processing technology and faces regulatory hurdles. A larger ₹3,500–₹5,000 crore plan for mining and processing is also underway. Meanwhile, India is exploring imports from Japan and Vietnam to meet short-term demand.

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Amid ongoing restrictions on rare earth mineral exports from China, the Indian government is preparing to invest significantly in domestic rare earth magnet production to reduce its dependence on Chinese supplies. According to media reports, the Ministry of Heavy Industries and the Department of Atomic Energy are jointly working on a scheme worth ₹1,000 crore to support local manufacturing of rare earth magnets.

The scheme, expected to be finalized within the next 10 to 15 days, targets the production of approximately 1,500 tonnes of rare earth magnets annually. While full details are still awaited, it is reported that five to six companies have already expressed interest in participating in the sector.

Rare earth magnets are vital for industries such as automotive, particularly electric vehicles, and renewable energy, including wind turbines. With China dominating global rare earth supply and recently restricting exports, Indian industries have faced significant shortages, prompting the government to take action to strengthen domestic capabilities. 

Officials have reported that approximately 30 automotive companies applied to the Directorate General of Foreign Trade (DGFT) two weeks ago for permission to import rare earth magnets from China. The move is intended to mitigate potential production disruptions caused by the current shortage of these critical components. Sources indicate that several companies, including Indian advanced materials firms, have pitched proposals to the government to build domestic supply chains for rare earth magnets. Notable among them are Midwest Advanced Materials, Entellus Industries, and the state-run Indian Rare Earths (IREL).

India is home to the world’s third-largest reserves of rare earth elements, yet less than 20% of its geological potential has been explored. India is particularly rich in monazite, a vital source of neodymium, which is essential for producing rare earth magnets used in electric vehicles, wind turbines, and electronics. However, the country faces major regulatory and technological obstacles. 

Industry experts believe this is a crucial moment to accelerate exploration and strengthen domestic capabilities in the sector. 

A key recommendation by industry experts is to remove monazite from the atomic minerals list, which would allow private sector participation in mining and attract critical investment. In addition to regulatory reform, India needs substantial investment in smelting technologies and R&D. The technology to extract neodymium from rare earth chlorides is currently monopolized by Japan and China, putting India at a strategic disadvantage.

At present, Indian Rare Earths Ltd. extracts rare earth oxides from beach sand, but the process stops short of producing value-added materials. Merely mining monazite and producing chlorides is insufficient. To truly become self-reliant, India must develop the capacity to extract neodymium and manufacture permanent magnets domestically. IREL, which operates under the Department of Atomic Energy, is currently the only public sector unit holding rare earth stockpiles in India. It is expected to play a key role in the initiative by supplying around 500 tonnes of raw materials to Original Equipment Manufacturers (OEMs), helping meet industry demand.

In parallel, the government is also working on a larger initiative to enhance domestic rare earth mineral production. An investment of ₹3,500 to ₹5,000 crore is being considered to support the mining and processing of rare earth elements within the country. Internal assessments are currently underway to expedite the rollout of this broader scheme.

With domestic production of rare earth magnets expected to take around two years to materialize, the government and industry are actively exploring interim procurement options. Alternative sources are being considered, including Japan and Vietnam, where rare earth materials are available. The Ministry of Heavy Industries is spearheading consultations with companies to evaluate the level of investment support needed and to finalize a subsidy structure. The primary objective is to establish domestic manufacturing capacity and reduce dependence on imports from China.