CONTEXT

• India is planning fiscal incentives to support domestic rare earth magnet production.
• Triggered by China’s April 4 decision to curb exports of rare earth materials — critical to automobiles, clean energy, and defence.
• Global supply chains, especially automobile production, face immediate risk due to China’s monopoly (90% of global processing capacity).

CONCEPT: WHAT ARE RARE EARTH MAGNETS & WHY IMPORTANT?

• Rare earth magnets: Strong permanent magnets made from rare earth elements like Neodymium, Samarium, etc.
• Applications:
  • Electric Vehicles (EVs) & Hybrid cars
  • Wind turbines (clean energy)
  • Missile guidance systems, radars (defence)
  • Consumer electronics: speakers, hard drives
• India has rare earth reserves, but processing & refining capacity is limited.
• Dominance of China creates a strategic vulnerability in both economic and security domains.

CURRENT: INDIA’S PROPOSED MEASURES

• Ministry of Heavy Industries is in talks with companies to:
  • Provide Production-Linked Incentives (PLIs).
  • Offer price-gap funding between Indian and Chinese magnets to ensure cost parity.
• Aim: Develop long-term stockpiles and self-reliant supply chain.
• Current dependency:
  • Despite IREL (state-owned) mining rare earths, most commercial needs still imported from China.
• Auto industry crisis:
  • SIAM (Society of Indian Automobile Manufacturers) warns of production halts as early as June.
  • Suzuki (Japan) has already stopped Swift car production due to Chinese export curbs.
• Next Steps:
  • Govt may meet industry reps soon to finalize incentive details.
  • Delegation to Beijing planned to expedite export clearances temporarily.