Syllabus: Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
Context
- Union Cabinet approved a ₹7,280-crore scheme to domestically manufacture Rare Earth Permanent Magnets (REPMs).
- The scheme aims to establish end-to-end facilities converting rare earth oxides → metals → alloys → finished magnets.
- Announcement coincides with China tightening export controls, impacting global supply chains.
China’s Dominance in Rare Earth Elements
- REEs comprise 17 minerals valued for high density, conductivity and melting point.
- Though only 30% of global reserves, China controls 70% of global REE production and 90% of processing capacity.
- China imposed export restrictions in April 2025 on seven REEs and finished magnets, severely affecting industries—particularly electric vehicles.
- These controls echo earlier strategies:
- 2009 export quotas, later struck down by the WTO in 2015.
- 2020 restrictions on graphite exports.
- 2021 export licensing, limiting supplies to selected industries.
- China uses REE dominance as a geopolitical, geoeconomic, and strategic tool, especially amid trade tensions with the U.S.
Why India is Prioritising REEs
- REEs are essential for electric mobility, renewable energy systems, electronics manufacturing, and defence.
- India imported 53,000+ tonnes of REE magnets in FY 2024-25, despite possessing 8% of global reserves—mainly monazite sands in AP, Odisha, Tamil Nadu, Kerala.
- India contributes <1% to global REE output.
Government Initiatives
- Launched National Critical Mineral Mission (₹16,300 crore within an overall ₹34,300 crore outlay) for exploration, processing and recycling.
- New mining blocks auctioned; sector opened to private participation since August 2023.
- Aim: attract private exploration, reduce import dependence, and build domestic value chains.
Challenges
- Limited refining capacity, inadequate skilled workforce, and weak innovation ecosystems.
- Long gestation period for REE production facilities.
- Regulatory bottlenecks and slow clearances hinder private investment.
- Few exploration licences have been granted; information asymmetry remains high.
Opportunities
- India’s monazite sands contain valuable light REEs, including Neodymium, used in permanent magnets.
- Growing interest in REE recycling from end-of-life electronics and appliances.
- Rising global diversification away from China offers strategic leverage.