Finance ministry raises questions over PLI plan for rare-earth output

Says these subsidies could leave bidder with little incentive to improve efficiency or cut costs

- DEEPAK PATEL

The Department of Expenditure (DoE), under the Union Ministry of Finance, has raised questions on the Ministry of Heavy Industries' (MHI's) ₹7,350 crore production-linked incentive (PLI) scheme to boost the domestic manufacturing of rare-earth permanent magnets (REPM).

It has said while it (the MHI) aims to reduce dependence on magnets imported from China, this could leave India dependent on rare-earth oxides from abroad and provide subsidies so generous that the winning bidders may have little incentive to improve efficiency or cut costs.

The DoE also said the scheme could set a precedent of launching PLI schemes each time there is a crisis in automotive components, a field dominated by China, and questioned why a separate scheme was needed instead of leveraging the National Critical Mineral Mission (NCMM), Business Standard has learnt.

Since April, China has restricted imports of REPM to India, affecting automobile output in the country.

One of the key concerns flagged by the DoE is that a significant number of automotive components are not manufactured in India, with China enjoying "hegemony" in many of them.

The department has, therefore, asked the MHI whether it intends to propose a PLI scheme for "each such crisis" that arises with other automotive components, officials stated.