
India is holding talks with companies to establish long-term stockpiles of rare earth magnets by offering fiscal incentives for domestic production, people familiar with the matter said.
Building such a supply chain could take years, but would reduce India's dependence on shipments from China, which sent shockwaves across global industries, particularly autos, with its April 4 move to curb exports of rare earth materials.
China controls 90% of the processing of such magnets, also used in industries such as clean energy and defence.
Now Prime Minister Narendra Modi's government wants to develop domestic manufacturing capabilities and is considering offering production-based fiscal incentives to companies, said two sources who sought anonymity as the talks are private.
The scheme, being drafted by the ministry of heavy industries, also envisions partly funding the difference between the final price of the made-in-India magnet and the cost of the Chinese imports, the first source said.
This would help achieve cost parity and boost local demand, the source said, adding that funding for the scheme has yet to be decided, with the government likely to meet industry officials next week to finalise the details.
The heavy industries ministry did not respond to Reuters' queries.
Although a state-run firm, IREL, has been mining rare earth materials for years, these are mainly used by the atomic energy and defence units, with most supplies for other uses still imported from China.
India's move comes as auto companies the world over flag risks that they could face supply disruptions within days.
In Japan, Suzuki Motor, has suspended production of its Swift car because of China's curbs.
In India, auto industry body SIAM has privately told the government it expects production "to come to a grinding halt" within a timeframe starting from the end of May or early June.
The heavy industries ministry also plans to send a delegation of auto industry executives to meet officials in Beijing to push for faster approvals, with two industry officials warning that was the only near-term solution.
"The short-term solution has to be to get Chinese authorities to clear things," said one of the executives, who fears shortages at his company. "A radical shift in supply chain is not possible in the short term."
Some auto companies and their suppliers will be able to stretch operations until the end of June, after which the situation will turn "really scary", said the second executive, adding it would affect not just electric cars but all vehicles.
India has the world's third-largest reserves of rare earths of 6.9 million tons, the U.S. Geological Survey says, but only mines a fraction because private companies make limited investments.
A government campaign launched in April, the National Critical Mineral Mission, aims to attain self-reliance in the sector. In recent years, it has begun exploration for neodymium, a rare earth widely used in magnets for the auto industry.
India also exports neodymium to Japan for lack of domestic processing capability, two of the sources said.
Commercially available export data showed India exported nearly $7 million worth of the rare earth material to Toyota Tsusho between January and April.
This week, PM Modi's office discussed the impact of the magnet crisis on the small but fast-growing EV sector, to which investors have committed billions of dollars, a person familiar with the talks said.
It also weighed the possibility of tariff exemptions for imports of machines required by domestic manufacturers, the source said, adding, "The government is looking into it critically. They are serious."
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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