Can India dominate rare earth magnet manufacturing with its Rs 7,280cr REPM scheme?

In a major move to reshape its industrial base and reduce import dependency, the Government of India has approved a ₹7,280 crore scheme to establish large-scale domestic manufacturing of sintered rare earth permanent magnets (REPM). The decision, cleared by the Union Cabinet chaired by Prime Minister Narendra Modi on November 26, 2025, positions REPM manufacturing as a critical enabler of India’s ambitions across electric mobility, renewable power, aerospace, defence, and advanced electronics.

The scheme will support the creation of 6,000 metric tons per annum (MTPA) of REPM capacity across five integrated manufacturing facilities, marking the first such initiative of its kind by the Indian government. Structured through a globally competitive bidding process, the plan is seen as a foundational step toward making India a credible global player in magnet technology while advancing its commitments under the Atmanirbhar Bharat Abhiyan and Net Zero 2070 framework.

Why rare earth magnets are central to India’s industrial and climate transition goals

Rare earth permanent magnets are widely considered irreplaceable in many clean energy and defence technologies. They are critical to manufacturing traction motors for electric vehicles, direct drive turbines for wind power, guidance systems for missiles, as well as high-efficiency motors used in robotics, drones, and medical devices. Their superior magnetic strength and heat resistance make them indispensable in high-performance applications.

Despite having domestic access to rare earth ores, India has until now lacked the downstream capacity to convert these into finished REPMs. As a result, the country’s entire demand for these magnets has been met through imports, primarily from China, which currently dominates global REPM production and magnet supply chains.

India’s consumption of rare earth magnets is projected to double by 2030, driven by exponential growth in electric vehicle manufacturing, industrial automation, and consumer electronics. The inability to produce REPMs locally has long been considered a strategic gap, especially as the country moves to localize components for EVs and defense-grade systems. By addressing this bottleneck, the new scheme aims to reduce the country’s reliance on external suppliers and insulate critical industries from global supply shocks.

What the ₹7,280 crore REPM scheme includes and how it will operate

The scheme comprises two major financial components. A total of ₹6,450 crore will be disbursed as sales-linked incentives over a five-year period, tied directly to the volume of REPMs sold in the domestic and export markets. This performance-based payout model is expected to ensure commercial accountability and incentivize actual market delivery, rather than subsidizing capital expenditure alone.

In addition, ₹750 crore will be offered as capital support to cover the high upfront costs associated with building advanced REPM manufacturing units. These will include end-to-end facilities capable of converting rare earth oxides into purified metals, processing those metals into specialty magnetic alloys, and finally sintering and shaping the magnets to industrial specifications.

The entire scheme will run for seven years from the date of award. This includes a two-year gestation period for facility setup, followed by five years of incentive-linked production. Each successful bidder will be allocated up to 1,200 MTPA of REPM capacity, ensuring that no single player monopolizes the ecosystem. The Ministry of Heavy Industries will be the nodal authority managing implementation.

Importantly, the bidding process will be open to global and domestic players, with evaluation parameters including technical capability, investment commitments, supply chain integration, and export potential. The government expects a significant level of interest from foreign manufacturers looking to diversify operations away from China, as well as from Indian conglomerates seeking entry into high-value advanced materials.

How this move fits into India’s critical minerals and strategic materials roadmap

The REPM initiative aligns with a broader push by the Government of India to create a domestic ecosystem around critical minerals and strategic materials. This includes recent efforts to unlock value from monazite beach sand reserves in Odisha, Kerala, and Tamil Nadu; streamline licensing for rare earth oxide extraction; and operationalize partnerships under Khanij Bidesh India Limited (KABIL) for overseas mineral acquisition.

At present, India’s rare earth mining is limited and heavily concentrated in public sector entities such as Indian Rare Earths Limited and its joint ventures. However, processing capabilities to transform oxides into metals and further into finished magnets have been virtually non-existent at commercial scale. By plugging this critical gap in the value chain, the REPM scheme is expected to unlock synergies across mining, metallurgy, and advanced manufacturing.

Analysts tracking India’s critical minerals sector believe this could also catalyze private sector interest in rare earth refining and magnet alloy innovation. Until now, India’s industrial focus has primarily been on the extraction of monazite and ilmenite for titanium and thorium, with limited technological investments in downstream magnet material science. The latest policy shift is seen as a signal that India intends to compete in this high-tech space over the long term.

Industry sentiment and implications for electric mobility, defence and energy sectors

Stakeholders across the automotive, defence, and renewable energy sectors have broadly welcomed the Cabinet’s approval of the REPM scheme. For electric vehicle manufacturers in particular, the ability to locally source traction motor components using rare earth magnets could sharply reduce import dependence and improve localisation levels under existing production-linked incentive schemes.

Defence manufacturers and space system integrators are also expected to benefit from tighter supply chain control and reduced exposure to geopolitical disruptions in magnet procurement. Aerospace-grade magnets are a vital part of control surfaces, guidance systems, and stabilisation technologies used in fighter jets, satellites, and missiles. Local sourcing of REPMs could thus provide greater mission assurance in sensitive applications.

Indirect commentary from industrial groups suggests that the move could prompt technology transfers or joint ventures with Japanese, Korean, or European players who already have mature REPM processes. These collaborations could also help ensure India meets global standards on magnet composition, coercivity, thermal stability, and lifecycle performance.

While the scheme does not currently include recycling mandates or R&D incentives, experts say that downstream innovation and circular economy models for REPMs will eventually become necessary. Globally, magnet recycling is being explored as a critical step to ease pressure on primary ore extraction and reduce environmental impact.

Outlook: India’s position in the global rare earth magnet race

The REPM manufacturing scheme is expected to serve as the cornerstone of India’s future strategy to secure value chains in strategic clean technologies. With global demand for rare earth magnets projected to grow significantly over the next two decades, early-mover advantage in manufacturing and export capability could open up new industrial corridors and trade partnerships.

Analysts expect India’s next policy steps to include the refinement of environmental and safety regulations for REPM facilities, the development of training institutes for specialized talent in magnetics, and the acceleration of linkages between rare earth producers and advanced component makers.

The global magnet market is currently valued at over $17 billion, with sintered rare earth magnets accounting for the bulk of high-value applications. If implemented effectively, India’s scheme could position it to capture a meaningful share of this market, reduce dependence on Chinese imports, and emerge as a critical enabler in the global energy transition.

Key takeaways from India’s ₹7,280 crore rare earth magnet manufacturing scheme

• The Union Cabinet approved a ₹7,280 crore scheme to establish domestic manufacturing of sintered rare earth permanent magnets (REPM) in India.

• The initiative targets a total integrated REPM production capacity of 6,000 metric tons per annum (MTPA), distributed across five manufacturing entities.

• Sales-linked incentives worth ₹6,450 crore will be disbursed over five years, while ₹750 crore will be allocated as capital subsidy to support infrastructure development.

• The scheme will run for seven years in total, including a two-year gestation period and five years of incentive-linked production.

• India currently relies almost entirely on REPM imports; this program aims to reduce dependency and build supply chain resilience for electric vehicles, renewables, aerospace, and defence.

• Each selected bidder will be allocated up to 1,200 MTPA capacity through a global competitive bidding process, ensuring broad industry participation.

• Rare earth magnets are essential in EV traction motors, wind turbines, defence systems, and high-end electronics due to their strength and thermal durability.

• The scheme aligns with India’s Net Zero 2070 commitment and its Atmanirbhar Bharat vision by promoting indigenous technology and clean-tech infrastructure.

• Industry experts see this as a potential catalyst for foreign joint ventures, technology transfers, and the growth of India’s advanced materials ecosystem.

• The move complements broader critical minerals policy efforts, including domestic rare earth extraction and overseas sourcing under the Khanij Bidesh India Limited (KABIL) initiative.