Govt to boost domestic earth magnet production, provide fiscal incentives amid Chinese export curbs
The government is conducting talks with companies to build long-term stockpiles of rare earth magnets by providing fiscal incentives for domestic production, according to a report by Reuters citing people aware of the development.
This stockpile will help to reduce dependence of India on supplies from China, which curbed exports of rare earth minerals from April 4 onwards, raising concerns among major industries across the globe, particularly the auto industry. Currently, China processes 90% of these magnets, which are also utilised in industries like clean energy and defence.
The current NDA government, led by PM Modi, aims to enhance domestic manufacturing capabilities and is exploring the possibility of providing production-based fiscal incentives to companies, the report said.
A scheme drafted by the Ministry of Heavy Industries plans to partly fund the difference between the final cost of domestically produced magnets and the price of the Chinese imports, it added, citing a person aware of the development.
This scheme aims to attain cost parity and enhance local demand. However, the funding for this scheme remains undecided as the government may meet industry officials next week, the report said.
The Ministry of Heavy Industries did not officially confirm the development. Livemint could not independently verify the report.
The government's move to ramp up domestic production amid concerns across the globe over supply disruption due to Chinese export curbs.
Suzuki Motors has halted production of its Swift car in Japan due to restrictions imposed by China.
Meanwhile, SIAM, India's auto industry body, has privately informed the government that it anticipates production "to come to a grinding halt" from late May or early June onwards.
The Heavy Industries Ministry may also send a delegation of auto industry executives to meet officials in Beijing for quicker approvals over supply concerns, the report said. However, the industry officials cautioned that it was the only near-term solution.
"The short-term solution has to be to get Chinese authorities to clear things," an executive told Reuters. 'A radical shift in supply chain is not possible in the short term,' it added.
Certain auto manufacturers and their suppliers could potentially remain operational until the end of June. However, beyond that point, the situation may become "really scary," another executive said, who warned that this will impact not only electric vehicles but all types of cars.
Notably, India possesses the world's third-largest reserves of rare earths, estimated at 6.9 million tons, according to the US Geological Survey. However, a small amount is extracted due to limited investments from private companies.
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