The Government of India has approved a ₹7,280-crore incentive programme aimed at developing large-scale rare earth permanent magnet manufacturing within the country. The scheme will support activities including extraction, processing, and magnet production to strengthen the domestic supply chain for critical components used across electric vehicles (EVs), electronics and other advanced industries.
The move comes amid recent export restrictions from China, which have affected availability of rare earth materials for Indian EV manufacturers.
Importance of Rare Earth Magnets
Rare earth permanent magnets are used in a wide range of applications, including consumer electronics and automotive systems. In conventional internal combustion engine vehicles, these magnets are found in components such as steering motors and wiper systems.
In EVs, they are essential for Permanent Magnet Synchronous Motors (PMSMs), which offer higher torque, improved efficiency, and compact designs, making them integral to modern electric powertrains.
Scheme Structure and Rollout
The programme will follow a production-linked incentive-style framework. Selected companies will receive financial support based on investment commitments, localisation targets, production volumes, and technological capability.
Key structural points include:
- First two years: focus on setting up integrated manufacturing facilities
- Following five years: sales-linked incentives
- Up to five manufacturers to be selected through a global bidding process
- Combined targeted annual capacity: 6,000 tonnes of rare earth magnets
Industry Landscape
China currently accounts for about 90% of global rare earth magnet production and 70% of processing capacity. India’s EV sector has faced supply chain disruptions due to recent export limitations imposed by China.
While the new magnet manufacturing scheme aims to reduce reliance on imports, the broader EV ecosystem continues to depend heavily on imported lithium-ion cells, which currently remain a major cost component. India’s EV market saw growth moderate to 17% year-on-year in FY2025 from 42% in FY2024.
Resources and Recycling Potential
India holds nearly six million tonnes of rare earth mineral reserves. The National Critical Mineral Mission aims to support sustainable extraction while promoting recycling of rare earths from e-waste and discarded magnets.
Recycling businesses are expected to benefit from increased domestic demand. Companies such as Attero, which holds 47 patents related to rare earth and lithium recovery, are positioned to participate in the emerging circular supply chain.
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