Larsen & Toubro Ltd. intends to produce rare-earth magnets in India, according to sources familiar with the situation, as the engineering giant capitalizes on a government initiative to lessen dependence on imports and ease China’s control over this essential industrial component.

The conglomerate is crafting a proposal for the government's ₹7,280 crore ($764 million) incentive program for these magnets, the sources revealed, preferring anonymity due to the confidential nature of the discussions. L&T must find a technology partner possessing the required expertise for its entry into a field recognized for high-precision engineering, according to reports.

According to reports, the program has attracted 15 bids to date, including one from a consortium that includes Japan’s Proterial Ltd. and two Indian automotive companies.

L&T's action would signify a diversification for India's biggest infrastructure firm beyond its conventional sectors like construction, heavy engineering, and industrial projects. The strategy aligns with its suggested funding in electric vehicle motors that depend on permanent magnets made from rare earth elements.

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The company’s possible foray into rare-earth permanent magnets coincides with the government’s effort to establish a domestic supply chain following China's restriction on exports of this vital component in April last year, as they control 90% of global production. In addition to electric vehicle motors, magnets find applications in wind turbines, industrial robots, and various electronic devices.

India sanctioned a seven-year initiative featuring ₹6,450 crore in sales-related incentives and ₹750 crores in capital subsidies last year to enhance magnet manufacturing. The nation seeks to develop an annual domestic capacity of 6,000 metric tons, providing assistance to approximately five firms.

The government expects that the incentives will motivate local businesses and foreign magnet manufacturers to establish production facilities, decreasing reliance on Chinese suppliers that have gained from state assistance and economies of scale.

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L&T's proposal to produce rare-earth magnets will additionally aid its initiative to locally create next-generation electric vehicle traction motors. The engineering firm announced last month during its earnings call that it has teamed up with EVR Motors, which is based in Israel.

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L&T announced that its EPS Mobility unit has obtained its first commercial order to deliver 500,000 of these motors to a two-wheeler manufacturer over a period of three years, without disclosing the client's identity.