Explained: India beats China on rare earth magnets, government will spend Rs 7,350 crore

rare earth

China currently has a monopoly on rare earth magnets. China has put a stop to its global supply. Due to which India’s auto and electronic sector is facing a lot of shock. However, talks are going on between the two countries regarding supply. But India has made a big plan to solve it. Under this plan the government is going to spend a huge amount. According to a Business Standard report, the government is in the final phase of launching a Rs 7,350 crore scheme to promote domestic production of Sintered Rare Earth Permanent Magnets (REPM) and reduce dependence on imports. The move comes months after China banned the export of REPM in April, reducing supplies to India’s automobile and electronics industries.

The initiative – likely to be called the Scheme for Promoting Sintered Rare Earth Permanent Magnets Manufacturing in India – aims to establish a completely indigenous manufacturing ecosystem with an annual production capacity of up to 6,000 tonnes. According to official documents, the scheme is expected to run for seven years. It aims to create a domestic supply chain for converting NdPR (neodymium-praseodymium) oxides into sintered NdFeB (neodymium-iron-boron) magnets.

These are important for sectors like automobile, electronics, wind energy and defence. REPM production includes mining, beneficiation, processing, extraction, refining into rare earth oxides, conversion into metals and mixed metals, and ultimately magnetite manufacturing. The proposed plan will encourage facilities capable of completing the last three steps: converting rare earth oxides into metals, converting metals into mixed metals, and converting mixed metals into magnets. Convert to. Currently, India lacks the technology and infra to complete these phases.

Manufacturing Capacity and Eligibility

Under this scheme, the government will provide support to the construction of five integrated REPM manufacturing units, each with a capacity of up to 1,200 tonnes per annum. Applicants can bid for a minimum of 600 tonnes per year and a maximum of 1,200 tonnes per year, in increments of 100 tonnes per year. Selected companies will be eligible for two types of financial assistance – (a) Sales based incentives on sales of sintered NdFeB magnets; (b) Capital subsidy for setting up integrated NdFeB manufacturing units in India. India currently imports almost all of its REPM requirements. According to government estimates, domestic demand is about 4,010 tonnes per year, which is expected to almost double to 8,220 tonnes by 2030.

Although NdPR oxide prices in India are broadly similar to global prices, finished REPMs are about 43 per cent costlier in the country than abroad. The upcoming plan covers a period of two years to set up the plant and start production. A document states that a capital subsidy of 15 percent will be provided to the beneficiaries on eligible investments made after April 1, 2025.

The capital cost of setting up the unit will be high as most of the plant and machinery will have to be imported from countries other than China at a relatively higher cost. Therefore, there is a need for capital subsidy to compensate the higher costs borne by domestic makers. Between the third and seventh years, production will be gradually increased to achieve the target of 6,000 tonnes per year.

Demand for rare earth is continuously increasing in India

Bidding and Selection Process

The Heavy Industry Ministry will issue a Request for Proposal (RFP) through a Global Tender Inquiry (GTE) to invite bids for 5 Integrated Sintered REPM Manufacturing Plants. The process will use a transparent minimum cost system that will include a “two-envelope” structure – technical and financial bids. Financial bids of qualified applicants will be opened only in the technical round.

In the financial bid, applicants will have to quote the amount of sales incentive per kilogram. The maximum limit of which is Rs 2,150 per kg sintered NdFeB magnet. Considering that the average selling value is Rs 5,000 per kg and there is a price difference of 43 per cent compared to the international market.

A document said that the 5 applicants with the lowest incentive amount – L1, L2, L3, L4 and L5 – will be eligible for incentives for their allocated capacity under the scheme and will henceforth be called ‘beneficiaries’. However, no official statement from MHI has come out yet.

Domestic supply of REPM raw material in India remains limited. Indian Rare Earths Limited (IREL), under the Department of Atomic Energy, currently produces about 500 tonnes of NdPr oxide annually, which is sufficient for about 1,500 tonnes of sintered REPM. Given the proposed target under the scheme, participants will have to independently source most of their NdPr oxide. Thus, the oxide supplied by IREL will support approximately 1,500 tonnes of sintered NdFeB magnet production per annum, Business Standard reported in a document. The remaining 4,500 tonnes per annum… will be produced by the beneficiary from settled oxide under its own supply arrangement.”

If each winning bidder sets up a plant with a 1,200 tonne per annum capacity, each will require approximately 400 tonne per annum of NdPr oxide. Under the plan, IREL will supply 200 tonnes per year to L1 bidder, 167 tonnes per year to L2 and 133 tonnes per year to L3. The remaining quantities – 200, 233 and 267 tonnes per year respectively – will have to be obtained by these companies independently. L4 and L5 bidders will have to manage their entire requirement of 400 tonnes per annum of NdPR oxide without any supply from IREL. The Heavy Ministry will monitor the entire plan. An inter-ministerial scheme monitoring committee headed by the ministry secretary will monitor the progress. Will resolve the challenges that arise and ensure adherence to deadlines. This new initiative will operate independently from other government programs.