India Mulls Incentivising Rare Earth Production To Tame China's Tantrums

In a move to reduce India’s dependence on China for rare earth magnets, the Centre is working on a plan to incentivise local production.

According to a PTI report, the ministries of heavy industries and mines are drafting a new scheme that would offer incentives to both private companies and public sector undertakings (PSUs) to produce rare earth materials within the country.

The step comes after China imposed export restrictions in April 2025. These new rules require exporters to obtain licences and submit detailed information about the end-use of these materials.

Notably, the move has already impacted India, which imported more than 80% of its rare earth magnets, around 540 tonnes, from China in the last fiscal year.

This is concerning as rare earth elements such as dysprosium, terbium and gadolinium are crucial for modern technology. These minerals are critical for the manufacturing of electric vehicles (EVs), smartphones, renewable energy systems, and defence equipment.

However, over 90% of the global rare earth magnet processing happens in China, leaving countries like India vulnerable to supply chain shocks.

To secure alternative sources, India has started discussions with countries like Australia. The country’s trade and investment commissioner for New South Wales, Malini Dutt, reportedly said that the two countries are in talks to explore early-stage rare earth mining opportunities together.

Industry insiders, however, appear largely undeterred by China’s export ban, with many OEMs treating it as a short-to-medium term hurdle rather than a long-term crisis.

Automotive giants like Bajaj Auto and TVS have acknowledged potential production delays but believe the situation is manageable, especially for companies that have built sufficient inventory buffers.

Meanwhile, a growing number of players, including Ola Electric and Bengaluru-based Chara Technologies, are accelerating efforts to develop rare-earth-free motors.

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