Cabinet Nod For Rare Earths Scheme: A Carpe Diem Moment For Manufacturing Sector

The sintering process is an important thermochemical process in the blast furnace iron-making system. 

REPMs are one of the strongest permanent magnets that are vital for EVs, renewable energy, electronics, aerospace, and defence applications, an official press release said, according to which, "the scheme will support the creation of integrated REPM manufacturing facilities, involving conversion of rare earth oxides to metals, metals to alloys, and alloys to finished REPMs.” 

Rare Earth Magnets

As the demand for EVs, renewable energy, industrial applications, and consumer electronics rises, the government estimates that the consumption of REPMs will double by 2030. Right now, the demand for REPMs is met primarily through imports. Since China wields dominance in rare earth magnets, with about 90% hold in the global market, India, today, is in an unviable situation.

A few months ago, with China weaponising rare earth magnets, India’s EV industry, along with other sectors dependent on rare earth magnets, faced a crisis, resulting in production delays. Beijing lifted the curbs in August, which came as a sigh of relief for our EV and electronics sectors. This decision, however, was not the result of any magnanimity on the part of China; India had to make relaxations in terms of bilateral economic ties.

Incentives, Subsidy

The financial outlay of the scheme has two parts: sales-linked incentives of ₹6,450 crore for five years and a capital subsidy of ₹750 crore for setting up an aggregate of 6,000 tonnes of REPM manufacturing facilities.

The scheme envisions the total allocation capacity to five beneficiaries through a global competitive bidding process. Each of them will be allotted up to 1,200 MTPA of capacity, the official release said.

It will be a seven-year scheme, the duration of which will start from the date of award. It will include a two-year gestation period for setting up an integrated REPM manufacturing facility and five years for incentive disbursement on the sale of REPMs.

India has the competence to meet the REPM challenge squarely. Remember the early days of the pandemic? There was a shortage of PPE kits, but by the end of 2020, the country became the second-largest producer.

Key Factors

But the success of the REMP scheme will be predicated upon a harmonious functioning between government departments, private enterprises, and other stakeholders.

Had there been a harmony of such sorts, the REPM crisis would not have unfolded in the first place. 

Consider three facts:

Firstly, it was well known that EVs are heavily dependent on rare earth magnets; secondly, most of the rare earth magnet supplies come from China; and thirdly, India and China relations have been largely strained. 

Unfortunately, no one in the government put the three facts together; had someone done that, we would not have been so hopelessly dependent on China for rare earth magnets.

To be fair to the government, there was concern in some quarters. The Ministry of Coal & Mines did identify 30 critical minerals considered essential for economic development and national security of the country to ensure self-reliance and address “the vulnerability” in its supply chain. But, evidently, the urgency to expedite production was lacking.

A Crucial Step

So, the government’s initiative to galvanise REPM production hasn’t come a moment too soon; it should have come before, or at least at the time, when the policy push came for EVs. It looks like those who promoted EVs with remarkable zeal weren’t cognisant of the whole picture — or perhaps they and anyone else didn’t fully appreciate the issue of supply chains.

Now that the government has shown urgency; it is incumbent upon all its departments and private companies to strive to make the scheme successful.

(The author is a senior journalist, specialising in policy reporting and analysis. Views are personal.)