(MENAFN- Live Mint)

New Delhi: Amid China's continued chokehold on supplies, the government is finalizing an incentive scheme to boost local production of rare earth magnets with an allocation of around ₹7,300 crore, two officials aware of the matter said.

Companies interested in making the magnets, used in a variety of strategic sectors, need to invest at least ₹200 crore, and incentives are likely to equal 15% of the total investment, said the first of the two officials cited earlier, both of whom spoke on the condition of anonymity.

“The target of 6,000 mtpa (million tonnes per annum) by 2030 has been set under the scheme. So far, about seven companies, including Midwest (Hyderabad-based Midwest Advanced Materials), have shown interest in manufacturing rare earth magnets under the scheme," this official added. The scheme will operate under the Union ministry of heavy industries.

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Incentives will be available for companies that provide end-to-end magnet manufacturing capability, which means those manufacturers that source rare earths and process them into magnets will be eligible for incentives.

Rare earth magnets are the strongest type of permanent magnets, made from alloys of rare earth elements like neodymium-iron-boron (NdFeB) and samarium-cobalt (SmCo). These powerful magnets are crucial for compact, energy-efficient devices like electric vehicle motors, wind turbines, and a variety of electronics, defence, and energy transition.

Other companies that have shown interest include Bharat Forge, Mahindra & Mahindra, JSW Group and Sona Comstar, said the second official.

Queries emailed to the Union ministries of heavy industries and mines were not immediately responded to. JSW Group declined to comment, while spokespersons of Mahindra & Mahindra, Bharat Forge, and Sona Comstar did not immediately respond to queries on Wednesday evening. Spokesperson of Midwest could not be immediately reached.

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Currently, state-owned Indian Rare Earths Ltd (IREL) is the sole refiner of rare earths in India, with a capacity to make about 1,500 tonnes of rare earth magnets a year.

The second official added that the finance ministry has approved the allocation of ₹7,300 crore for the scheme, and it would now the Union cabinet's nod.

According to the first official, the government is planning to use ₹6,500 crore for capex incentives, and a ₹800 crore for operational expense incentives.

Rare earth elements, while abundant but not easily found in large mineable deposits, are known for their unique magnetic and luminescent properties. They are widely used in automotive motors and LED lights. China dominates the refining and supply of 90% of heavy rare earths or those with higher atomic weight, according to estimates by the International Energy Agency.

China started restricting exports of rare earths in April after trade tensions worsened with the US due to tariffs imposed by president Donald Trump's administration.

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China's export curbs prompted new international alliances. India joined hands with its QUAD (Quadrilateral Security Dialogue) partners US, Japan, and Australia to form a new alliance to boost the supply of critical minerals and rare earths in the global economy, and loosen China's chokehold on the commodity.

India has also flagged the disruption of supply chains on the global stage. Prime minister Narendra Modi at the 17th Brics summit in July emphasized on making critical mineral supply chains reliable and ensuring that no country uses these resources for its own selfish gains or as a weapon against others.

"We need to work together to make supply chains for critical minerals and technology secure and reliable. It's important to ensure that no country uses these resources for its own selfish gain or as a weapon against others," Modi had said.

India is working on increasing its rare earth refining capacity. The Union ministry of mines is preparing a scheme with an allocation of about ₹1,500 crore to support rare earth refining in the country.

India has about 7.23 mt of rare earth elements oxide reserves in the coastal beaches, red sand and inland alluvium in parts of Andhra Pradesh, Odisha, Tamil Nadu, Kerala, West Bengal, Jharkhand, Gujarat and Maharashtra, while another 1.29 mt in parts of Gujarat and Rajasthan, the government informed Parliament on 23 July. But state-run IREL is the only refiner of the critical minerals in the country.

Mint earlier reported that India may link incentives aimed at spurring rare earth magnet manufacturing to the level of local materials, used as the government seeks to counter China's supply curbs.

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