Rare-Earth Magnets and Specialty Steel: India's ₹7,280 Crore Bet on the EV Supply Chain's Missing Middle

PIB PRID 2194684 · Ministry of Heavy Industries

The Union Cabinet has approved a ₹7,200 crore scheme to build India’s first significant rare-earth permanent magnet manufacturing base — the component category that sits, largely imported, inside every EV traction motor, wind turbine and defence system built in the country today.

What the scheme actually pays for

The Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets (REPM), approved by the Union Cabinet under the Ministry of Heavy Industries, splits its ₹7,200 crore outlay into two instruments: ₹6,450 crore in sales-linked incentives paid on REPM sales over five years, and a ₹750 crore capital subsidy for setting up the manufacturing facilities themselves. (Government and press accounts of the scheme cite a round ₹7,280 crore total — ₹80 crore above the sum of these two published components — but no public breakdown identifies a third line item accounting for the gap, so this piece reports the figure its own sources support.) Capacity is allocated to five beneficiaries through a global competitive bidding process, each eligible for up to 1,200 MTPA — adding up to the 6,000 MTPA national target.

REPMs (rare-earth permanent magnets) are the magnet type used in high-performance electric motors, wind-turbine generators, consumer electronics and defence systems — anywhere a strong, compact, temperature-stable magnetic field is needed without an external power source.

Update, 13 August 2026: 20 bidders for 5 slots

The scheme notification was issued 15 December 2025, the Request for Proposal floated on the CPP portal 20 March 2026, and a pre-bid conference held 7 April 2026. Bids closed 12 August 2026, and the Ministry of Heavy Industries opened 20 technical bids the following day — a 4x oversubscription against the five manufacturing slots on offer. Bidders include Larsen & Toubro, Coal India, ReNew, NEO Performance Materials (Singapore), Attero Recycling, Midwest Energy (in joint venture with Midwest Advanced Materials), Proterial (India), and eleven other companies, spanning mining, recycling, renewables and specialty-materials firms rather than only incumbent magnet makers. The bid count itself doesn't tell you which five will be selected or whether their proposed capacity will actually reach the 6,000 MTPA target — that depends on the technical and financial evaluation that follows — but it is a first, concrete signal that the scheme's incentive structure was attractive enough to draw a genuinely competitive field rather than a token handful of applicants.

The magnet families this scheme targets

Of these, the REPM scheme specifically targets sintered NdFeB and related rare-earth magnet manufacturing — the highest-value, most import-dependent category, and the one EV traction motors are built around.

The import bill this scheme is meant to shrink

A Rajya Sabha answer from the same Ministry (1 August 2025) gives the actual DGCIS trade data behind the phrase "import-dependent," broken out by HS code, in USD:

Source: Rajya Sabha, "Disruption in the Supply of Rare Earth Magnets," Ministry of Heavy Industries, answered 1 August 2025, Annexure-I (value) and Annexure-II (quantity), sourced to DGCIS. A third HS line in the same answer, 8505.90 (Electro Magnetic Lifting Heads — industrial crane equipment, not the traction-motor magnets this scheme targets), adds a further $88.67 mn from World / $28.04 mn from China at 31.6% dependency; excluded from the combined total above as a different product category.

India's combined bill for the two magnet categories the REPM scheme actually targets was roughly $220.8 million in 2024–25 (very roughly ₹1,850 crore at rupee-dollar rates prevailing that year; this piece did not verify the precise annual average rate, so treat the rupee figure as indicative, not exact) — up modestly from $194.5 million in 2022–23, with China's share of that bill climbing from 68.2% to 73.0% over the same two years (metal-magnet dependency on China specifically rose faster, from 70.9% to 81.3%). Set against the scheme's own numbers, that's a striking ratio: a ₹7,280 crore, five-beneficiary scheme aimed at an annual import line worth on the order of ₹1,800–2,000 crore — the incentive outlay is roughly four times one year's entire magnet import bill, reflecting that REPM is underwriting a multi-year domestic manufacturing base (sales-linked incentives run five years) rather than a single year's substitution.

The specialty-steel overlap question

Running alongside the magnet scheme is PLI 1.2, the second tranche of the Production Linked Incentive scheme for Specialty Steel under the Ministry of Steel, covering higher-value steel grades (coated/plated steel, high-strength/wear-resistant steel, electrical steel, specialty rails, and alloy steel products) rather than the commodity-grade steel India already produces in surplus.

The two schemes sit closer to each other than their names suggest. Magnet manufacturing and specialty steel (particularly electrical steel, used in motor laminations) are adjacent inputs into the same electric-motor value chain, and it is not yet settled how a REPM applicant’s capacity requirement interacts with PLI 1.2’s steel-grade categories, or whether magnet-alloy inputs qualify under the steel PLI at all. Applicants building integrated motor-component capacity will need clarity on both fronts before committing capital — including whether the emerging category of hydrogen-processed/green steel gets folded into PLI 1.2’s scope.

Why this is an EV-supply-chain story, not just a minerals story

Rare-earth magnets are the least visible, most concentrated link in the EV motor supply chain: a handful of countries mine and refine the rare-earth oxides, and an even smaller number sinter them into finished magnets. A traction-motor-grade NdFeB magnet made domestically closes one of the specific import lines sitting inside India’s Chapter 85 electrical-machinery deficit — the same deficit this blog covered separately in the Chapter 87 vs Chapter 85 trade-balance analysis. Rare-earth magnets alone will not close a $50bn-plus chapter-level gap, but they are one of the highest-value-density components in it, and one of the few where a single, targeted, five-beneficiary scheme can plausibly move the needle within its 7-year window.

MRI machines: the other magnet demand story

Electric-vehicle motors are not the only place a domestic magnet-manufacturing base matters. India’s MRI-scanner density per capita remains well below that of high-income countries such as the US, Korea and Japan, and public-hospital imaging queues routinely stretch from months to years — in one documented case verified by The Times of India, a Delhi patient referred to AIIMS for an MRI was issued an OPD appointment date of September 2027 (reported November 2024). See this blog’s medical-device trade-gap piece for the full picture.

An MRI scanner’s core is a superconducting magnet assembly, and India’s only Superconducting Magnet Testing, Validation & Integration Centre — a ₹25 crore Central-funded facility at AMTZ Vizag — already anchors domestic MRI-magnet work, alongside indigenous cryogen-free 1.5T scanner designs now in production. This is a narrower overlap with the REPM scheme than it might first appear: high-field scanners like these run on niobium-titanium superconducting wire, not sintered rare-earth (NdFeB) permanent magnets, so a 1.5T cryogen-free design doesn't draw on the specific rare-earth-oxide-to-finished-magnet supply chain REPM is built around. The genuine overlap is with the specialty-alloy and precision-cryogenic manufacturing base underneath both efforts — skills and facilities a magnet-and-motor supply chain and a superconducting-magnet supply chain both need, even though the finished magnet materials differ. Lower-field, open-bore MRI designs are the exception: those typically do use NdFeB permanent-magnet arrays and would sit on the REPM-relevant supply chain directly, but that is not the cryogen-free 1.5T category India is currently building domestically.

Why a targeted subsidy can make sense here, in trade-theory terms

Rare-earth magnet manufacturing is close to a textbook case for the "strategic trade" argument economists Paul Krugman, James Brander and Barbara Spencer developed in the early 1980s: in an industry with a small number of global producers, heavy economies of scale, and dominant incumbents already benefiting from that scale (China refines the overwhelming majority of the world's rare-earth oxides and sinters most of its finished magnets), a government subsidy can, in specific circumstances, shift profit and market share toward a domestic entrant that would otherwise never reach the scale needed to compete — not because the domestic firm is more efficient, but because the subsidy offsets the incumbent's head start. The theory comes with real caveats economists raised almost immediately after Brander and Spencer proposed it: it depends on governments correctly picking which industries and firms actually have this dynamic (most don't), and other countries retaliating with their own subsidies can erase the gain entirely, turning a strategic-trade programme into a subsidy race with no net winner.

Separately, and older, is the "infant industry" argument traced to Alexander Hamilton's 1791 Report on Manufactures and developed further by Friedrich List: a new domestic industry may need temporary protection or support to reach the scale and experience where it can compete unaided, even if it can't compete on day one. The REPM scheme's structure — a capital subsidy to get facilities built, then a five-year sales-linked incentive that only pays out as the industry actually sells product — is a fairly literal implementation of that argument: support tied to actual market performance, tapering by design rather than open-ended. Whether either argument turns out to justify this specific ₹7,200 crore programme is a judgment about magnets and geopolitics this article isn't making; the point is narrower — unlike most PLI schemes, which subsidise industries with plenty of domestic competitors already, REPM sits in the specific, empirically rare category where economists across very different traditions have at least entertained the case for this kind of intervention.

Sources: PIB press release, PRID 2194684 (Cabinet approval, REPM scheme outlay and structure); PIB press release, PRID 2299078 (bid timeline and list of 20 bidders, posted 13 August 2026); PIB PRID 2151394, "Disruption in the Supply of Rare Earth Magnets," Rajya Sabha, Ministry of Heavy Industries, answered 1 August 2025 (magnet import-bill and China-dependency figures, sourced by that answer to DGCIS); Ministry of Steel PLI 1.2 guidelines for Specialty Steel (scheme categories, publicly notified); MedicalJagat, Nov 2024, citing Times of India verification (AIIMS Delhi MRI wait-time case).