India Acts on Auto & Renewable Industry Concerns With ₹5,000 Cr Incentive to Boost Rare Earth Production for Critical EV & Clean Energy Needs
In a decisive move to strengthen its critical mineral supply chain and reduce dependence on Chinese imports, the Indian government is finalising a ₹5,000 crore incentive scheme aimed at promoting the domestic production of rare earth minerals and permanent magnets. The scheme is expected to receive formal approval within the next fortnight, according to a senior government official.
Reverse Auction Model to Drive Faster Rollout
The proposed scheme will operate through a reverse auction mechanism, offering financial incentives to manufacturers willing to produce rare earths and derived magnets at competitive rates. This initiative comes in response to growing concerns over India’s reliance on Chinese supplies, especially after China tightened export controls in April 2025 on seven key rare earth elements and related magnets—materials crucial for electric vehicles (EVs), wind turbines, and renewable energy infrastructure.
“The priority is to kick-start domestic production of critical minerals at the earliest,” the official told ET, adding that at least five large Indian companies have already expressed informal interest during consultations with the government.
EV Industry Among the Top Beneficiaries
Rare earth magnets play a vital role in EV powertrains, motors, and other components. With India’s EV and wind energy sectors accounting for over 50% of the domestic rare earth demand (estimated at 4,010 metric tonnes in 2025), the scheme is seen as a game-changer for ensuring supply chain security. Demand is projected to more than double to 8,220 metric tonnes by 2030, driven by India’s clean energy and e-mobility push.
Automakers and clean energy companies have long flagged supply vulnerabilities and have welcomed government intervention to safeguard their operations against international disruptions.
Policy Backing for Critical Mineral Mission
In tandem with the incentive scheme, the Centre is also preparing amendments to the Mines and Minerals (Development and Regulation) Act to accelerate the critical mineral mission. Regulatory reforms will be complemented by efforts to achieve commercial-scale domestic production of rare earth magnets later this year, sources indicated.
A Strategic Step for Atmanirbhar Bharat in Clean Tech
The new scheme aligns with India’s broader goals of becoming self-reliant in clean technologies and reducing exposure to geopolitical risks. With EVs, wind turbines, and other green technologies at the heart of India’s net-zero ambitions, the move is expected to provide a timely boost to local manufacturers, enabling a stronger, more resilient ecosystem for India’s energy transition.
