A number of applicants under India’s Electronics Component Manufacturing Scheme (ECMS) have flagged concerns over meeting their first-year production targets due to ongoing shortages of rare earth minerals.
According to ET, at least 10 companies have raised the issue with the ministry of electronics and information technology (MeitY), warning that if the shortage continues for another six months, they may not be able to meet the incentive-linked thresholds.
The rare earth scarcity stems from export restrictions imposed by China, which controls more than 90% of global rare earth processing. China introduced special licensing requirements for seven rare earth elements and associated magnets from April 4 this year, leading to supply disruptions across key industries.
These include electronics, automobiles, and clean energy technologies.
"Companies have expressed concern, but within the sector, it isn't an alarming outcry," an official aware of the matter was quoted as saying by ET. “If there is a component that uses rare earth, instead of importing that rare earth and making that component in India, they will simply import that component.”
While firms are exploring alternatives, such as sourcing from different suppliers or shifting to rare-earth-free technologies, the timing has been challenging, particularly for those scaling up manufacturing for exports.
“The ECMS has been unveiled at a time when many entities want to scale up and take advantage of exports,” said Ashok Chandak, president of the India Electronics and Semiconductor Association (IESA), as quoted by ET. He added that supply shocks in rare earth magnets have hit the sector hard.
The Rs 22,919 crore ECMS, launched in May, seeks to build a robust domestic ecosystem for electronic components like multi-layer PCBs, lithium-ion cells, resistors, capacitors, display and camera modules.
PCBs have attracted particular attention from applicants, according to KS Babu, secretary of the Indian Printed Circuit Association (IPCA), who noted that the scheme addresses both multi-layer and high-density interconnect boards.
However, he also pointed out that local production of key inputs like copper-clad laminates is still missing. “Chinese suppliers are now taking advantage by squeezing prices, citing problems with shipments,” Babu said, as per ET.
The scheme, effective from FY26 through FY32, includes a one-year gestation period. However, manufacturers, particularly MSMEs, have sought quicker access to incentives to recover their investments. A Delhi-based PCB maker was cited by ET saying that the government has informally assured leniency during the verification and claims process.
Responding to industry requests, MeitY will extend the ECMS application window beyond July 31, as confirmed by officials. Many small firms are still finalising their sourcing channels, joint ventures, and tech partnerships.
In a written reply to the Rajya Sabha, minister of state for commerce and industry Jitin Prasada noted that the export restrictions on rare earth magnets have led to supply chain bottlenecks for auto and electronics sectors. However, the ministry has not received specific reports of cost escalation or project delays from industry hubs in Maharashtra, as per news agency PTI.
Despite the disruption, industry leaders remain hopeful. “China also can't afford to continue an export ban for long, since their companies will begin bleeding and it will place a long term strain on their relations with many countries,” Chandak said, as per ET.
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