India is currently in talks with Japan and Vietnam for rare earths in response to China's recent export restrictions. Additionally, the country plans to introduce an incentive scheme for processing rare earth oxides into magnets, which is expected to take two years, Union Minister of Heavy Industries HD Kumaraswamy said on Tuesday, adding that a decision regarding this scheme will be taken in 15-20 days.
Following the escalating tariffs imposed by US President Donald Trump on China, Beijing put export restrictions on seven heavy and medium rare earth elements and magnets on April 4. These elements — samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium — are crucial for defence, energy, and automotive technologies. Now, Chinese companies must secure defence licenses to export these materials.
“We have had discussions with the mines ministry, and they are working on this issue. We expect to take a final decision within the next 15-20 days,” Kumaraswamy told reporters during the launch of the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) portal.
Business Standard earlier reported that the Indian government was considering developing 3,000 to 5,000 incentive schemes and looking at alternative countries to mitigate disruptions from China’s supply. Additionally, India was seeking to negotiate with China for motors and sub-assemblies if the export norms for magnets were not relaxed, the newspaper reported.
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Stakeholder discussions are ongoing, and the Ministry of Heavy Industries (MHI) has received varied responses, with some companies requesting support levels of 50 per cent, and others seeking 20 per cent. “This will be subject to a competitive bidding process, which will help us determine the required level of support,” said Kamran Rizvi, secretary of the ministry.
The level of support needed is significant since global prices of rare earth oxides and magnets on the Shanghai Stock Exchange reveal minimal price differences — about 5 per cent. With China holding a monopoly on these materials, it has been able to keep magnet prices exceptionally low.
“The level of incentives we require aims to assist companies in the investment needed to transition from oxide to magnet production. The necessary government support must be quantified, ensuring that the magnets produced in India are competitive globally,” Rizvi explained.
Asked if cabinet approval would be necessary, Rizvi indicated that it would depend on the level of incentives offered. “If the amount is less than ₹1,000 crore, our minister and the finance minister can approve it. Should it exceed ₹1,000 crore, cabinet approval will be required. We are still assessing the required subsidy amount,” he said.
In the meantime, Midwest Advanced Materials has expressed interest in processing rare earths and has committed to delivering 500 tonnes by the end of December this year, the minister confirmed.
Earlier this month, Business Standard also reported that Midwest, a Hyderabad-based company, expressed interest to mine and process rare earths with the technology transfer from the Non-Ferrous Materials Technology Development Centre.
Currently, Indian Rare Earth Limited (IREL), a company under the Ministry of Atomic Energy, is the sole holder of rare earth materials in India. It has sufficient resources to produce 1,500 tonnes of magnets annually.
Kumaraswamy has met the mines minister, and there are ongoing efforts to source rare earth materials from countries such as Japan and Vietnam.
Regarding potential production impacts starting in July, the minister noted that each company was taking measures to minimise disruptions. “While there was an understanding that some disruption might occur, recent developments suggest improvement. No reports indicate a halt in production. Fully assembled components can still be imported, and companies are actively working on solutions,” the minister said.
“We are discussing motors and their components. We may need to explore options if the disruptions persist long term,” he added.
In other developments, India is reaching out to countries like the US, Germany, Czechoslovakia, and Vietnam, as well as their respective embassies, to attract investment from global automotive companies to manufacture electric vehicles (EVs) in India. A four-month window will be given for these companies to apply for SPMEPCI. As of now, Tesla has not shown interest in participating in the scheme. “Ultimately, we will know which global automakers come on board by October 21,” Rizvi said.
The scheme was announced in March 2024 and the guidelines were subsequently issued earlier this month.
SPMPCI allows OEMs to import electric cars with a minimum value of $35,000 at a reduced customs duty of 15% for five years, subject to a minimum investment of Rs 4,150 crore to manufacture cars in India.
