---
title: "Production Linked Incentive (PLI) Scheme — Definition"
description: "The Production Linked Incentive (PLI) Scheme offers cash incentives to Indian manufacturers based on incremental sales, boosting domestic production."
url: "https://modeldiplomat.com/learn/glossary/production-linked-incentive-scheme"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- The Production Linked Incentive Scheme is an Indian government programme that pays manufacturers cash incentives calculated as a percentage of incremental sales of goods made domestically.
- How does PLI differ from a traditional capital subsidy like M-SIPS?
- Which ministries administer the PLI Scheme?
- Is the PLI Scheme compliant with WTO rules?
- Has the PLI Scheme delivered measurable results?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

The Production Linked Incentive Scheme is an Indian government programme that pays manufacturers cash incentives calculated as a percentage of incremental sales of goods made domestically.

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## Positions at a glance

### Supporters

The mechanics vary materially by sector, reflecting differing industrial structures. For pharmaceuticals and bulk drugs, incentives are tied to manufacturing of specified Key Starting Materials, Drug Intermediates and Active Pharmaceutical Ingredients to break import reliance. For automobiles and auto components, the scheme rewards advanced automotive technology products and electric-vehicle components rather than legacy internal-combustion parts. The semiconductor and display programme operates on a fiscal-support model with capital subsidy of up to 50 per cent of project cost, a structural departure from the pure sales-linked formula. Solar PV modules, advanced chemistry cell batteries, specialty steel, telecom and networking products, white goods, food processing, textiles and drones each carry bespoke eligibility ceilings, investment floors and incentive slabs negotiated with industry.

### Opponents

Procedurally, the PLI mechanism rests on a single defining principle: incentives are disbursed only against incremental sales of eligible products manufactured in India, measured over a fixed base year. An applicant firm is selected through a competitive application process administered by the relevant nodal ministry or a designated Project Management Agency. Selected firms commit to threshold investments and, in most sectors, to minimum incremental production or sales targets. In each performance year the firm files claims documenting its qualifying incremental sales above the base; an independent agency verifies the figures; and a cash incentive—commonly in the range of 4 to 6 per cent of incremental sales for electronics, with sector-specific rates and tapering schedules—is credited directly to the firm. The cycle repeats annually for the scheme's tenure, usually five years.

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Example

In 2023, Apple supplier Foxconn expanded iPhone assembly at its Tamil Nadu plant under the electronics PLI Scheme, helping push India's smartphone exports past US$10 billion in FY2024.

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