Rare Earth Elements Crisis: Electronic Component Companies Warn Of Missing Incentive-Linked Targets

Rare Earth Crisis: Electronic Component Companies Warn Of Missing Incentive-Linked Targets

SUMMARY

Applicant Companies under INR 22,919 Cr incentive scheme have raised concerns about missing incentive-targets for the first year, due to shortage of rare earth elements

In April, China banned export of seven critical rare earth elements in response to Trump’s tariff announcements

India utilises rare earth metals in the manufacturing of EVs, conventional vehicles, consumer electronics, among others

With China’s recent restrictions on the export of certain rare earth elements, several companies under electronics component manufacturing scheme have reportedly flagged concerns over missing incentive-targets for the first year due to shortage of required resources.

An ET report, citing MeitY officials, said that around 10 companies out of a total of 110 applications under the INR 22,919 Cr incentive scheme have raised concerns as the industry is looking to expand production lines.

Some of the companies are also considering importing components instead of making them locally from scratch. The report further cited a source who highlighted that the situation is not that alarming as any component containing rare earth metal can be directly imported instead of manufacturing it.

The Centre launched ECMS scheme in March to focus on non semiconductor electronics components manufacturing. For the first year, the incentive payout is linked to specific targets including production value, capital expenditure and employment creation.

However, the applicant companies under this scheme are worrying about meeting these targets.

This comes close on the heels of China banning the export of seven critical rare earth elements — samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. This ban came as a response to Donald Trump’s 34% tariff announcement on Chinese imports in the US.

While the two nations retaliated on the trade border, India’s manufacturing sector might also be at the stake.

India utilises rare earth metals in the manufacturing of EVs, conventional vehicles, consumer electronics, among others. After China’s decision to curb the export of rare earth elements, Indian automobile giants, including TVS Motor and Bajaj Auto flagged possible production delays. Maruti Suzuki India is also reconsidering production of its upcoming model e-VITARA due to the shortage of rare earth magnets.

Recently, Foxconn’s Telangana plant was also hit by the shortage of dysprosium, disrupting the production of Apple AirPods. As per reports, Foxconn brought the supply issue to the notice of the Telangana government

Notably, Centre is currently working on an INR 1,345 Cr scheme to incentivise local magnet production, to bear with the shortage of rare earth elements in the country.

Currently under the inter-ministerial consultation, the proposed scheme aims to support two selected manufacturers with “end-to-end” backing to convert rare earth oxides into magnets.

All this crisis drives attention towards India’s global positioning in terms of rare earth metals.

The country is considered as the fifth largest reserve of rare earth elements. However, India is yet to cash in on this opportunity. While it has some rare earth reserves in Rajasthan, Kerala, Tamil Nadu, West Bengal, Odisha, Andhra Pradesh, Maharashtra, and Gujarat, the mining segment has not been streamlined due to either geographical sensitivity or nascent stage of exploration.