Production Linked Incentive (PLI) Schemes — How the Incentive Works, Sectors, Eligibility and the Textile and Electronics Windows

Production Linked Incentive schemes are the Government of India's flagship manufacturing incentive under Make in India: a performance-based payment, sector by sector, on the incremental sales a manufacturer achieves over a base year. Unlike a capital subsidy, PLI pays nothing for building a plant; it pays a percentage — generally 3% to 20% depending on the sector and year — of the additional sales that plant generates, for a fixed number of years. The stated goals are scale, import substitution, domestic value addition, exports and employment, and a January 2026 government review credited the schemes with a sharp rise in manufacturing and export revenue in mobile phones, electronics, pharmaceuticals and other sectors.

The schemes are designed for medium and large manufacturers. Most participants are private or public limited companies, LLPs, Indian subsidiaries of foreign companies or joint ventures; each sector fixes a minimum investment and a minimum turnover, and the entity must show a positive net worth, no NPA, clean tax compliance and no fraud litigation. Traders, white-label sellers who outsource production, low-investment units, assembly-only (SKD/CKD) operations and unregistered or agreement-based businesses are outside the schemes.

Sectors and indicative incentive rates

The incentive is never paid on total sales. Each scheme fixes a base year; the incentive for a scheme year is the rate applied to that year's eligible sales less the base-year sales — the incremental sales. If a company's eligible turnover is ₹140 crore against a base of ₹80 crore, the incremental sales are ₹60 crore and a 5% incentive pays ₹3 crore. Sales must be genuine commercial transactions backed by GST returns and invoices; loss-making sales, related-party padding and non-genuine transactions are disallowed, and claims are certified by a Chartered Accountant and verified by the project management agency.

• •Base year — fixed by the scheme (for a company applying in FY 2025-26, the video's example uses FY 2024-25 as base).
• •Eligibility each year — minimum cumulative investment and minimum turnover thresholds must be met for the year's incentive.
• •Ceilings — sector schemes cap the incentive per year and per company; the textile scheme caps it at 10% of the annual incremental turnover.
• •Growth conditions — some schemes (textiles) require annual sales growth, for example 25% year on year, to stay eligible.
• •Claims — filed annually with CA-certified production, sales, export and investment data; the incentive is credited to the company's bank account.

The textile PLI covers man-made fibre apparel, man-made fibre fabrics and technical textiles (automotive, medical, industrial and similar) — not cotton garments, which fall under other schemes. It has two parts. Part 1 is for large investors: a minimum of ₹300 crore in plant, machinery and civil works and a minimum turnover of ₹600 crore, earning 15% in the first year and one percentage point less each year down to 11%. Part 2 is for medium investors: ₹100 crore minimum investment and ₹200 crore minimum turnover, earning 11% declining to 7%. Both parts require 25% year-on-year sales growth, pay only on incremental turnover after the first year, and cap the incentive at 10% of the annual incremental turnover. The scheme runs to FY 2029-30 with a two-year gestation period, and applications are invited in windows — the window the video discusses, opened in August 2025 after the United States imposed a 50% tariff on Indian goods, closed on 31 August 2025.

Worked example from the video: a Part 1 company with ₹600 crore of eligible turnover in the base year grows to ₹750 crore in year two — incremental turnover ₹150 crore, incentive at 14% would be ₹21 crore, but the 10% ceiling limits it to ₹15 crore. Each subsequent year the rate falls by one point and the incremental turnover is measured against the base.

The 2025 electronics components scheme, with an outlay of ₹22,919 crore and a target of about 92,000 new jobs, incentivises the components India still imports: passive components such as resistors and capacitors, electro-mechanical parts such as connectors and relays, printed circuit boards, display and camera sub-assemblies and their sub-parts. It offers turnover-linked and capital-expenditure-linked incentives for greenfield and brownfield projects, with minimum investment and turnover thresholds that vary by category — the video cites about ₹100 crore of investment and ₹150 crore of turnover for the semiconductor-linked category and ₹20 crore and ₹40 crore for passive and electro-mechanical components. Private limited companies, LLPs and partnership firms are eligible under this scheme; applications are filed on the MeitY portal with company and project profiles, three years' audited financials, a feasibility report, investment and employment plans, and CA-certified turnover and net-worth certificates.

1. 1Step 1 — Eligibility: sector, entity form, minimum investment and turnover, financial health and legal standing are tested against the notification.
2. 2Step 2 — Application: company and project profiles, financials, DPR and declarations filed on the sector portal within the window; acknowledgement issued.
3. 3Step 3 — Scrutiny: the project management agency scrutinises, seeks clarifications by call or e-mail, and the approval letter is issued.
4. 4Step 4 — Investment and production: the plant is set up or expanded within the committed timeline; the gestation period runs.
5. 5Step 5 — Annual claims: CA-certified production, sales, export and investment data filed each year; incentive credited to the bank account after verification.

• •Traders and white-label sellers — PLI is for manufacturers with domestic value addition.
• •Assembly-only (SKD / CKD) operations importing kits — excluded.
• •Proprietorships, partnerships (except where a scheme allows them) and informal structures — the entity must be a company or LLP.
• •Sales without commercial substance, related-party circular billing or loss-making sales — disallowed and risky.
• •Missing the application window — windows open by notification and close within weeks.
• •Forgetting the annual claim cycle: incentives stop if a year's claim is not filed.