【By Observer Net, Chen Sijia】According to a report by Bloomberg in the United States on July 9, multiple sources have revealed that the Indian government is planning to invest 25 billion rupees (approximately RMB 2.1 billion) to support the rare earth permanent magnet industry, in an effort to reduce dependence on China. The policy blueprint may soon be submitted for cabinet approval, but the final expenditure of the plan may still change, depending on the results of internal negotiations within the Indian government.

After the Trump administration of the United States initiated the "tariff war," China introduced a series of measures to precisely counteract, in addition to imposing additional tariffs, it implemented export controls on seven types of medium and heavy rare earth materials, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. Rare earth permanent magnets are essential materials in fields such as electric vehicles and wind turbines, while China controls more than 90% of the global rare earth processing capacity.

According to sources who were informed, the tightening of China's rare earth exports has put the Indian automobile industry and other sectors in crisis, and the Indian government is seeking to support its domestic rare earth permanent magnet industry, to reduce its reliance on China. The Indian government is considering investing 25 billion rupees for this purpose, which has already attracted the interest of several companies, including India's mining giant Vedanta Group and electric vehicle parts manufacturer Sona BLW Precision Forgings Ltd.

The policy proposal indicates that India aims to support three to four large enterprises within seven years, using locally mined raw materials to produce about 4,000 tons of neodymium and praseodymium magnets.

According to the sources, the plan includes a two-year preparation period, and incentive measures will be gradually introduced over five years after production begins. As the Indian electric vehicle industry develops, the Indian government also considers investing up to 6 billion rupees (approximately RMB 500 million) for every 1,000 tons of capacity.

Vedanta Group's spokesperson told Bloomberg in an email: "Our interest in rare earth permanent magnet manufacturing stems from its strategic significance for green technology. These minerals are rapidly becoming a new lever of global influence."

Vivek Vikram Singh, CEO of Sona BLW, said that producing rare earth permanent magnets helps ensure the security of the company's supply chain, and they may seek to collaborate with another company to jointly develop the relevant technology.

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Bloomberg reported that India has been trying to increase output through supporting domestic production or overseas projects, but these initiatives are still in their early stages. The Indian state-owned enterprise Khanij Bidesh India Ltd. is seeking mining licenses in Latin America and is negotiating with countries such as Argentina, Zambia, and Australia.

Currently, it is almost impossible to produce rare earth permanent magnets in India without subsidies. According to the sources, the oxides required for production are supplied by the state-owned Indian Rare Earths Limited. Without capital and operational subsidies, the return on investment for projects in this sector would be negative.

According to the proposed policy blueprint, the Indian government will invite companies to bid for projects with an annual production capacity of between 500 and 1,500 tons. Manufacturers must meet strict criteria to qualify, including that at least half of the value of the final product must come from locally produced neodymium-praseodymium oxide - a key component in manufacturing high-performance magnets. After five years of starting production, the local procurement ratio will rise to 80%.

Last month, the Minister of Heavy Industries and Public Enterprises, Kumaraswamy, announced at an event in New Delhi that India is considering providing incentives to rare earth permanent magnet manufacturers, but he did not provide detailed information. During the BRICS meeting held in Rio de Janeiro, Brazil, from July 6 to 7, Prime Minister Modi also emphasized the necessity of ensuring the supply of critical minerals.

Although India ranks third in the world in terms of rare earth reserves, with proven reserves of 6.9 million tons, India lacks sufficient mining and processing capabilities. On July 7, the Indian newspaper Deccan Herald published an article stating that China's export restrictions on rare earth permanent magnets have exposed India's vulnerability, and India needs to take action to increase domestic exploration and production of key materials.

Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), an Indian think tank, believes that reverse engineering imported products for mid-to-low-end technologies, providing domestic production incentives, and long-term investments in deep technology manufacturing can help India reduce its dependence on other countries. "The time window for action is narrow, but the urgency is self-evident."

However, Abhijit Kulkarni, a partner at consulting firm EY-Booz Allen Hamilton, pointed out in an interview with the American Consumer News & Business Channel (CNBC) that so far, India's contribution to the global rare earth output is less than 1%. Lack of rare earth mining and processing technology and outdated infrastructure are major challenges currently facing India.

Gracelin Baskaran, director of the Critical Minerals Security Program at the U.S. think tank Center for Strategic and International Studies, believes that India cannot replace China's position in the market, but given India's considerable rare earth reserves, "it can play a role in providing new sources of rare earths."

This article is an exclusive piece by Observer Net. Reproduction without permission is prohibited.

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