The Production Linked Incentive (PLI) Scheme was launched by the Government of India in 2020 to encourage domestic manufacturing and attract investment across strategic sectors. Under the scheme, companies receive financial incentives based on incremental production and sales achieved over a fixed base year.
The scheme currently has an allocation of nearly ₹1.97 lakh crore and covers 14 sectors, including electronics, pharmaceuticals, automobiles, telecom, textiles, food processing, solar PV modules and drones. Depending on sector-specific guidelines, eligible companies can receive incentives ranging between 4% and 6% of incremental sales over a period that generally extends up to five years.
Objectives of the PLI Scheme
The PLI scheme has been introduced with multiple objectives linked to industrial growth and manufacturing expansion in India.
Key objectives include:
- Encouraging local manufacturing in sectors such as electronics, telecom, automobiles, pharmaceuticals and solar power
- Reducing dependence on imports, especially from China, for APIs, telecom equipment and electronic components
- Supporting large-scale investments, with investment commitments under PLI crossing ₹1.4 lakh crore by FY24
- Expanding exports and strengthening India’s position in global manufacturing
- Creating employment opportunities through factories, logistics, supply chains and ancillary industries
- Increasing the contribution of manufacturing to the Indian economy
- Supporting Atmanirbhar Bharat and Make in India initiatives
- Promoting technology transfer and high-tech manufacturing through participation of international companies
How the PLI Scheme Works
The scheme operates on the basis of incremental production and sales.
Basic Working Mechanism
- Companies invest in manufacturing facilities in India
- The government defines a base year for production and sales
- Incentives are provided if production or sales exceed the base year
- Incentives are calculated as a percentage of incremental sales
- Benefits are usually available for five years based on sector guidelines
Sectors Covered Under PLI
| Sector | Main Focus |
|---|---|
| Electronics & mobile manufacturing | Increase production of smartphones and components |
| Pharmaceuticals | Reduce dependence on imported APIs and bulk drugs |
| Telecom & networking products | Develop domestic telecom ecosystem |
| Automobile & auto components | Promote EVs and advanced automotive manufacturing |
| ACC Battery storage | Strengthen EV battery manufacturing |
| Solar PV Modules | Boost renewable energy manufacturing |
| Textiles | Promote MMF apparel and technical textiles |
| Food processing | Increase value-added food exports |
| Medical devices | Develop domestic medical equipment production |
| White goods | Manufacturing of ACs and LED components |
| Speciality steel | Improve domestic steel production capabilities |
| Drones & components | Support emerging drone industry |
| Semiconductor & display manufacturing | Develop chip manufacturing ecosystem |
| Pharmaceuticals & bulk drugs | Encourage local production of key drug ingredients |
Impact on Startups and MSMEs
The PLI scheme has opened opportunities for manufacturing startups operating in sectors such as EVs, drones, electronics and renewable energy.
MSMEs have also benefited by becoming suppliers and vendors for large companies approved under PLI schemes. Increased local production has supported the development of domestic supply chains and technology adoption.
The scheme has also attracted investor interest in startups involved in EV batteries, electronics manufacturing and advanced industrial technologies.
However, due to high investment thresholds and production requirements, many smaller startups and MSMEs face challenges in participating directly in the scheme.
PLI and the Atmanirbhar Bharat Vision
The PLI scheme supports the government’s Atmanirbhar Bharat initiative by encouraging companies to manufacture products within India instead of relying on imports.
The scheme is linked with the Make in India initiative and aims to strengthen domestic manufacturing capabilities in sectors such as electronics, telecom, automobiles, pharmaceuticals and solar energy.
More than 99% of handsets sold in India are now manufactured domestically, reducing dependence on imported mobile phones.
The scheme also focuses on increasing domestic value addition and strengthening India’s manufacturing ecosystem in areas including telecom equipment, EV batteries, drones and solar modules.
Eligibility Criteria Under PLI
Eligibility conditions vary across sectors and are defined by the concerned ministries.
General eligibility conditions include:
- Manufacturing operations must be located in India
- Companies must meet minimum investment and production targets
- Incentives apply only to incremental sales over the base year
- Both domestic and foreign companies can participate
- Some sectors require domestic value addition targets
- Companies must comply with timelines related to investment, production capacity and sales growth
Minimum investment thresholds differ across sectors, ranging from approximately ₹10 crore for MSME categories to over ₹100 crore for large-scale industries.
Benefits Offered Under PLI
The PLI scheme provides multiple benefits aimed at expanding manufacturing and exports.
Major benefits include:
- Financial incentives linked to incremental sales
- Support for large-scale industrial investment
- Job creation across manufacturing and supply chains
- Growth in exports, particularly in electronics and mobile manufacturing
- Encouragement for technology upgrades and process improvements
- Reduction in import dependence
- Strengthening India’s manufacturing ecosystem
By FY24, total investments under the scheme had reached ₹1.46 lakh crore.
Conclusion
The Production Linked Incentive Scheme has become a key component of India’s manufacturing strategy. By supporting investments, production growth, exports and domestic value addition, the scheme aims to strengthen India’s position as a manufacturing hub while supporting employment generation and industrial expansion across multiple sectors.