The government is working on fiscal incentives to promote domestic production of rare earth magnets in response to recent supply disruptions, which are currently dominated by China, said Union Minister H D Kumaraswamy on Friday. The Minister for Heavy Industries and Steel added that a scheme is being developed to provide targeted support for both capital and operational expenses, helping address cost disparities, offering relief from high tariffs on critical equipment, and ensuring supply continuity amid growing global restrictions.
“The ministry is actively tackling vulnerabilities in critical raw materials. Rare earth magnets are essential for EV motors and are heavily reliant on Chinese supply. We are preparing fiscal incentives to encourage their domestic production,” Mr Kumaraswamy said in a video message at the annual session of the Automotive Component Manufacturers Association (ACMA).
He further explained, “We are designing a scheme that will strengthen India’s role in global value chains by providing targeted assistance for capital and operational expenditures. This will help bridge cost gaps, offer tariff relief on key equipment, and secure supply continuity in light of increasing global constraints.”
In July, the minister had shared that inter-ministerial discussions were ongoing for a ₹1,345-crore scheme to support rare earth magnet production in India, with incentives proposed for two selected manufacturers. The subsidy aims to promote investment in processing facilities, enabling companies to convert rare earth oxides into finished magnets. Indian Rare Earth Magnets Ltd, a public sector enterprise under the Ministry of Atomic Energy, remains the sole repository of rare earth resources in the country.
China’s recent export restrictions on key metals have caused significant disruptions in automobile and semiconductor manufacturing across several nations, including India. Rare earth magnets, particularly neodymium-iron-boron (NdFeB), are critical for high-performance automotive applications such as traction motors in electric two-wheelers and passenger vehicles, as well as power steering motors in both electric and internal combustion engine vehicles.
