Rare Earth, Real Power: US Makes a $400M Move—Will India Dig Deeper?

In a dramatic attempt to challenge China's monopoly on rare earths, the US administration has invested $400 million in MP Materials, its sole vertically integrated rare earth producer. This historic step is a milestone towards calibrated industrial policy, throwing fundamental questions on India's policy in strategic sectors.

Important Points from the US Investment

It holds a 15% interest in the equity of MP Materials.

A 10-year offtake deal ensures purchase of all magnets manufactured

$110/kg price floor for neodymium-praseodymium guarantees economic feasibility

MP's new magnet factory will produce 10,000 metric tons annually in 2028

JPMorgan and Goldman Sachs are funding the project with $1 billion in capital.

Why Rare Earths Matter

Essential to defense systems, EV motors, wind turbines, and consumer electronics

China controls 85% of refining capacity in the world and 55% of mining

Supply chain disruptions have impacted US military readiness and technology firms

India's Industrial Policy Crossroads

India has 6.9 million tonnes of reserve of rare earth but with low production

Public sector units (PSUs) are preferred by current policy over globally competitive private companies

Programs like PLI are spread thin over industries, diluting impact

Experts call on India to guide private sector, concentrate on niche strategic areas, and enhance global competitiveness

The Strategic Imperative

India must shift from protectionism to performance

Industrial policy has to target global champions, not home insulation

Structuring procurement, R&D investment, and equity could unleash untapped potential

Sources: Economic Times, Moneycontrol, CNBC, Business Standard