India's ₹7,280 crore plan to manufacture rare earth magnets for EVs and defense is struggling due to a shortage of heavy rare-earth oxides. While the government aims for self-reliance, the country still imports most of its permanent magnet needs, highlighting risks to the program's success without secure raw material sources.
India is working to build a local supply chain for rare earth permanent magnets, which are essential components in electric vehicle (EV) motors and defense equipment. The Union Cabinet previously approved a ₹7,280 crore scheme designed to cover the entire manufacturing process, from raw oxides to finished magnets. However, the program is currently facing a significant operational challenge as the country remains heavily dependent on imports for critical heavy rare-earth oxides such as dysprosium and terbium.
Import Dependency and Manufacturing Gaps
Data from the 2022-2025 period shows that India imported approximately 60% to 80% of its permanent magnet requirements by value, and nearly 85% to 90% by volume. While domestic producers can source some light rare-earth oxides, the lack of a stable, large-scale supply of heavy oxides remains a bottleneck. This creates a financial and operational risk for manufacturers who may find themselves swapping one form of import dependency for another if they cannot secure reliable feedstock to feed their new facilities.
Challenges in Offshore Mining Initiatives
To bridge this resource gap, the government introduced the National Critical Minerals Mission (NCMM) with an outlay of ₹34,300 crore, aiming to tap into offshore mineral deposits. These efforts include exploring polymetallic nodules near Great Nicobar, which are rich in cobalt, nickel, copper, and rare earths. Despite the potential, the initiative has hit a wall. In late 2025, a tender for 13 offshore blocks—including seven blocks valued at over ₹1.5 lakh crore—was cancelled because no bidders came forward. Industry observers note that this was likely due to the high cost and lack of specialized deep-sea mining equipment among domestic firms.
Strategic Outlook for Investors
For investors, the success of the rare earth magnet sector depends on more than just government funding. The ability of companies to form international partnerships for technology transfer and secure long-term ore-to-oxide processing agreements will be critical. Moving forward, the industry must watch for developments in how the government integrates the National Critical Minerals Mission with the needs of the magnet manufacturing program. The key monitorable will be whether companies can successfully secure technology partnerships or international off-take agreements to ensure a steady flow of raw materials, as these will determine the long-term profitability and viability of the projects currently under development.