In terms of ongoing discussions between USA & China, it is noticed that magnet is the key requirement of USA. Therefore, in the agreement they are proposing to reduce the tariff imposed on China from 125% to 55% and also allow Chinese students to study in USA. It itself indicates the monopoly of China to supply magnet. Therefore, in the PLI Scheme while working out domestic value addition, import of rear earth magnet and cost thereof is excluded while arriving domestic value addition for the purpose of eligibility and entitlement of incentive under Production Linked Incentive Scheme declared by the government.
However, due to China’s ongoing export restrictions of seeking various declarations or some other declarations while importing the magnets, automobile companies have represented to government to allow entire assembly containing Rear Earth Magnet and exclude the cost of import of such assembly containing magnet such as traction motors, e-drive units, etc. while calculating the domestic value addition. Otherwise, no one will be eligible and entitled to obtain incentive under Production Linked Incentive Scheme notified by the government. Since assembly cost is substantially higher than that of import cost of rear earth magnet.
In this situation, the existing exemption on raw material alone is insufficient. To avoid disqualification from incentive eligibility under PLI and PM E-Drive, there is an urgent need for the Ministry of Heavy Industries (MHI) to extend the DVA exemption to such critical assemblies.
MHI can explore and notify a structured mechanism to:
- Identify eligible assemblies containing rare earth magnets
- Allow cost exclusion of such assemblies while computing DVA
- Apply this for a defined, reviewable period aligned with the evolving global situation
Without this support, OEMs may fail to meet DVA thresholds not because of inefficiency, but due to geopolitical supply chain pressures.
And with no timeline assurance from China on easing the export restrictions, policy must proactively insulate domestic industry from external shocks.
Industry Recommendations:
- Notify assembly-level DVA exemption for components embedded with rare earth magnets
- Allow job work sending indigenous components outside India on job work basis and assembly with magnet can be imported and only job work charges thereof to be considered for the calculation of domestic value addition.
- Define a transparent, review-based exemption process
- Ensure PLI benefits are not disrupted for reasons beyond industry control
