The Indian government is in the final stages of introducing a ₹7,350 crore scheme aimed at promoting domestic production of sintered rare earth permanent magnets (REPMs) and reducing import dependence, according to information accessed by Business Standard. The initiative comes in the wake of China’s export restrictions on REPMs in April, which disrupted supplies for India’s automobile and electronics industries.
The scheme — tentatively titled the Scheme to Promote Sintered Rare Earth Permanent Magnet Manufacturing in India — seeks to establish a fully indigenous manufacturing ecosystem with an annual capacity of up to 6,000 tonnes. It will run for seven years, as per official documents.
Objective and Scope
The programme aims to develop a complete domestic value chain for transforming NdPr (neodymium-praseodymium) oxide into sintered NdFeB (neodymium-iron-boron) magnets — essential components for the automobile, electronics, wind energy, and defence sectors.
REPM production involves several stages: mining, beneficiation, processing, extraction, refining to rare earth oxide, conversion to metal and alloy, and finally, magnet manufacturing.
The proposed scheme will incentivise facilities capable of executing the final three steps — converting oxide to metal, metal to alloy, and alloy to magnet — which India currently lacks the infrastructure and technology to perform.
Manufacturing Capacity and Incentives
Under the scheme, the government plans to support the establishment of five integrated REPM manufacturing units, each with a capacity of up to 1,200 tonnes per annum. Applicants can bid for capacities between 600 and 1,200 tonnes per year, in increments of 100 tonnes.
Selected firms will receive:
- A sales-linked incentive on sintered NdFeB magnet sales
- A capital subsidy for setting up integrated manufacturing units in India
Currently, India imports nearly all its REPM requirements. Domestic demand stands at around 4,010 tonnes annually, expected to rise to 8,220 tonnes by 2030.
Finished REPMs in India cost about 43% more than global averages due to the absence of economies of scale and subsidies prevalent in leading manufacturing nations.
To offset high setup costs, the scheme will provide a 15% capital subsidy on eligible investments made after April 1, 2025. The first two years will serve as a gestation period, with production ramping up between years three and seven to reach the 6,000-tonne target.
Bidding and Selection Process
The Ministry of Heavy Industries (MHI) will issue a Global Tender Enquiry (GTE) inviting bids for the five REPM facilities. The selection will follow a transparent, two-stage process — technical and financial.
Only technically qualified bidders will proceed to the financial round, where they must quote the per-kilogram sales incentive sought, capped at ₹2,150 per kg of sintered NdFeB magnet.
The five lowest bidders (L1–L5) will be declared beneficiaries under the scheme.
Raw Material Supply and Sourcing
India’s domestic supply of REPM raw materials is limited. Indian Rare Earths Ltd (IREL) currently produces around 500 tonnes of NdPr oxide annually, sufficient for roughly 1,500 tonnes of magnets.
Participants will need to secure most of their NdPr oxide independently.
- L1 bidder: 200 tonnes/year from IREL, 200 tonnes from own sources
- L2 bidder: 167 tonnes from IREL, 233 tonnes from own sources
- L3 bidder: 133 tonnes from IREL, 267 tonnes from own sources
- L4 & L5 bidders: full 400 tonnes from own sources
Oversight and Implementation
The scheme will be implemented by the MHI, with oversight from an inter-ministerial monitoring committee chaired by the MHI Secretary.
It will function independently from other programmes, such as the Production-Linked Incentive (PLI) scheme for automobiles and auto components, which includes rare-earth magnets as eligible components — though no company has yet applied under that category.