Production-Linked Incentive (PLI) Scheme for Rare-Earth Permanent Magnets (REPM)
The Ministry of Heavy Industries (MHI), under the PLI scheme for REPM, has been advised by the Department of Revenue not to include exemptions from customs duty or cess for importing machinery and equipment. The scheme proposes financial incentives to encourage domestic manufacturing of REPMs.
Key Details of the PLI Scheme
- Financial incentives include capital subsidies and sales-based incentives for private players.
- Expected to establish five manufacturing plants with a combined production capacity of 6,000 tonnes per year.
- Capital subsidy is deemed sufficient to offset the costs of importing machinery.
- Plants and machinery will primarily be sourced from countries like Germany, Japan, and South Korea due to restrictions from China.
Investment and Subsidy Details
- The Department of Atomic Energy (DAE) estimates that setting up a plant to manufacture 1,200 tonnes of REPM per year in India could cost approximately ₹1,000 crore.
- Capital subsidy support up to ₹150 crore for 1,200-tonne capacity plants, with lower caps for smaller plants:
- ₹75 crore for 600 tonnes
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- ₹100 crore for 800 tonnes
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- ₹120 crore for 1,000 tonnes
- Capital subsidy will be released post-commissioning of the plants.
Challenges and Strategic Concerns
- China's restrictions on REPM exports to India have impacted the Indian automobile industry's production.
- China dominates 90% of global REPM production and leads in necessary technology and machinery.
- The scheme aims to reduce dependency on Chinese imports but might lead to reliance on imported rare-earth oxides.
Concerns Raised by the Department of Expenditure
- Questioned the necessity of a separate scheme instead of utilizing the National Programme on Critical Minerals (NCMM).
- Warned against overly generous subsidies that could demotivate efficiency improvements or cost reductions by bidders.
- Pointed out that two-thirds of rare-earth oxide requirements would still need to be imported.
