Quick Answer
India’s Production Linked Incentive scheme represents one of the largest manufacturing policy commitments in the country’s history. With a total approved outlay of ₹1.97 lakh crore across 14 sectors, the scheme offers qualifying manufacturers cash incentives of 4-20% on incremental sales above a defined base year threshold. The financial upside is material. A manufacturer in the mobile phones sector hitting its targets consistently over five years can generate incentive receipts that fundamentally change the unit economics of its Indian operations.
Access to those incentives is conditional. Every PLI scheme sets binding eligibility requirements: minimum committed investment, minimum incremental sales thresholds, separate legal entity status, and a dedicated manufacturing facility in India. Several sectors also impose intellectual property requirements, particularly in pharmaceuticals, electronics, and semiconductors. Non-compliance is not treated lightly. Misrepresentation or failure to meet targets triggers full recovery of all incentives paid, plus penalty.
This guide explains the legal requirements that manufacturing companies and foreign investors need to understand before applying for PLI benefits, including eligibility criteria, IP requirements, the application process, and annual compliance obligations.
For a broader overview of the legal framework governing Indian manufacturing, see our Legal Guide for Manufacturing Companies in India.
What Is the PLI Scheme?
The Production Linked Incentive scheme is a central government program that offers financial incentives to manufacturers for achieving defined levels of incremental sales from products manufactured in India. Each PLI scheme is administered by a designated nodal ministry. The schemes vary in their sector focus, incentive structure, qualifying thresholds, and IP requirements, but they share a common structural logic: a manufacturer commits to investing in India and achieving sales targets, and the government pays a percentage of the resulting incremental revenue as an incentive.
The scheme has three core policy objectives: increasing domestic manufacturing output, reducing import dependence in strategic sectors, and improving the global competitiveness of Indian manufacturers. For foreign companies evaluating India entry, PLI schemes in sectors such as semiconductors, electronics, and advanced chemistry cells provide a financially significant mechanism for subsidizing greenfield manufacturing investment.
The incentive is paid after the fact. Manufacturers invest, produce, and sell. They then file an annual compliance report demonstrating that targets were met. Upon verification, the nodal ministry disburses the incentive for that year.
PLI Scheme: 14 Covered Sectors
The following sectors are covered under PLI schemes as of 2026. Outlay and incentive rate figures are sector-specific.
Sector | Total Outlay | Incentive Rate |
Mobile Phones and Electronic Components | ₹40,951 crore | 4-6% |
Pharmaceuticals (Bulk Drugs / APIs) | ₹6,940 crore | 10-20% |
Medical Devices | ₹3,420 crore | 5% |
Automobile and Auto Components | ₹25,938 crore | 13-18% |
Advanced Chemistry Cell Batteries | ₹18,100 crore | 18-20% |
Textile Products | ₹10,683 crore | 3-15% |
Food Processing | ₹10,900 crore | 4-10% |
Telecom and Networking Products | ₹12,195 crore | 6-7% |
White Goods (ACs and LED Lights) | ₹6,238 crore | 4-6% |
Specialty Steel | ₹6,322 crore | 4-12% |
Solar PV Modules | ₹4,500 crore | 4-5% |
Semiconductors and Display Fabs | ₹76,000 crore | Up to 50% capex subsidy |
Drone Manufacturing | ₹120 crore | 20% |
IT Hardware | ₹7,325 crore | 1-4% |
The semiconductor scheme operates differently from the others. Rather than an incremental sales incentive, it provides a capital expenditure subsidy of up to 50% on approved fab projects, administered under the India Semiconductor Mission. Companies evaluating semiconductor PLI should assess it separately from the sales-linked incentive model that governs the other 13 sectors.
PLI Eligibility Criteria: Common Requirements Across Sectors
Each PLI scheme publishes its own scheme guidelines, which set the specific eligibility thresholds for that sector. The following requirements appear across substantially all PLI schemes and represent the minimum legal conditions that applicants must satisfy.
Minimum Investment Commitment
Every PLI scheme sets a minimum incremental investment threshold that applicants must commit to making in India over the incentive period. The threshold varies significantly by sector. In mobile phones, the minimum investment for large domestic companies is ₹200 crore. In advanced chemistry cell batteries, the threshold is substantially higher.
The investment must be in plant, machinery, and equipment used for manufacturing in India. Working capital and land costs are generally excluded from the qualifying investment calculation. Manufacturers should review the scheme-specific definition of qualifying investment carefully before submitting a financial commitment.
Failure to meet the committed investment threshold within the specified period results in disqualification from the scheme and recovery of any incentives already disbursed.
Minimum Sales Targets
Incentives are paid only when a manufacturer achieves a defined level of incremental sales above a base year threshold. The base year is typically fixed at the year before the scheme application period opens.
The incremental sales target increases year on year over the incentive period. A manufacturer who meets the target for Year 1 but falls short in Year 2 will not receive incentives for Year 2. The Year 1 incentive already disbursed is not automatically clawed back if the shortfall is isolated, but repeated non-performance can trigger a scheme review.
Manufacturers should model their sales projections against the scheme’s annual targets before applying. Applying for PLI without a realistic assessment of target achievability creates financial and regulatory risk.
Separate Legal Entity
All PLI schemes require the applicant to be a separate legal entity incorporated in India. This means the PLI business must be conducted through an Indian company, not through a branch office, liaison office, or project office of a foreign corporation.
The separate entity requirement has direct implications for foreign companies evaluating PLI. A foreign manufacturer cannot apply for PLI in its own name. It must establish an Indian subsidiary or enter a joint venture with an Indian partner to be eligible. For guidance on structuring Indian subsidiaries and joint ventures for PLI participation, see our Corporate D3 (FDI) and Corporate C3 (Joint Ventures) resources.
The Indian entity must hold the manufacturing assets, employ the manufacturing workforce, and be the entity that enters the PLI agreement with the nodal ministry.
Dedicated Manufacturing Facility
PLI applicants must operate a dedicated manufacturing facility in India. The manufacturing operations that generate the qualifying incremental sales must take place in that facility. Manufacturers cannot aggregate production from multiple contract manufacturers or third-party facilities to meet PLI targets.
Some schemes allow multiple facilities owned by the same legal entity to be aggregated. Manufacturers with multi-site operations should confirm the aggregation rules under the specific scheme before applying.
The facility must be operational and producing eligible products. A greenfield facility that is under construction at the time of application may still qualify, provided the scheme timelines allow for construction completion before the first performance year.
IP Requirements Under PLI: Sector-Specific
IP requirements under PLI are not uniform. The majority of PLI schemes do not impose explicit IP conditions. Three sectors where IP requirements are central to the scheme structure are pharmaceuticals, electronics, and semiconductors.
Pharmaceutical APIs: Domestic IP Development
The pharmaceutical PLI scheme for bulk drugs and Active Pharmaceutical Ingredients targets domestic development of APIs that India currently imports. The scheme gives priority to manufacturers producing APIs under domestically developed process patents, rather than manufacturers simply replicating imported processes.
Under this scheme, manufacturers who hold or develop process patents covering the production of priority APIs receive preferential treatment in incentive calculations. A process patent protects the method of manufacturing a known or new substance under the Patents Act, 1970, even where the end product itself is not patentable. Manufacturers applying for pharmaceutical PLI should conduct a process patent audit before submission and file process patent applications for any novel manufacturing methods they have developed.
For a detailed explanation of process patents and how they interact with manufacturing IP strategy, see our IP Protection for Manufacturing Companies in India (2026).
Electronics and Mobile Phones: Domestic Design
The electronics and mobile phones PLI scheme encourages manufacturers to develop components and products using domestically created designs, rather than assembling imported designs under license.
Manufacturers who develop original product designs in India and protect them through industrial design registration under the Designs Act, 2000 are in a stronger position to demonstrate genuine domestic value addition, which the scheme rewards. Design registration protects the visual and aesthetic features of a product, including its shape, configuration, and ornamentation, for an initial period of 10 years, renewable for a further five years.
Semiconductors: IP-Heavy Scheme
The semiconductor PLI scheme is the most IP-intensive of all PLI schemes in India. Companies applying under the India Semiconductor Mission must demonstrate that they hold or are developing proprietary technology for semiconductor fabrication, packaging, or design. The scheme is structured to attract companies with genuine IP assets in semiconductor technology, not companies acting purely as contract manufacturers for foreign IP holders.
The ₹76,000 crore total outlay and the up to 50% capital expenditure subsidy make this scheme the single largest financial commitment under PLI. The IP intensity of the eligibility criteria reflects the policy intent: building indigenous semiconductor capability rather than assembly-line participation.
How to Apply for PLI
The application process follows a consistent structure across most PLI schemes. Sector-specific variations exist in portal systems, timelines, and documentation requirements, but the core steps are as follows.
Step 1: Identify Nodal Ministry and Scheme Portal
Each PLI scheme is administered by a specific central government ministry. Pharmaceuticals are administered by the Department of Pharmaceuticals. Electronics and mobile phones are administered by the Ministry of Electronics and Information Technology (MeitY). Identify the correct nodal ministry for your sector and access the scheme portal published by that ministry.
Step 2: Register on PLI Portal
Create a company account on the designated portal. Registration requires company incorporation documents, PAN, GST registration, and authorized signatory details. For foreign-owned Indian subsidiaries, additional documentation confirming the ownership structure and FDI compliance will be required.
Step 3: Submit Application
The application requires financial projections, a detailed investment plan, manufacturing facility details, product specifications, and supporting documents demonstrating eligibility. Applications that include IP assets, whether patents, design registrations, or proprietary technology, should include documentation of those assets at this stage.
Incomplete applications are rejected or returned for resubmission. We recommend conducting a pre-submission review to confirm that all eligibility conditions are met and all documentation is in order before filing.
Step 4: PLI Selection
The nodal ministry reviews applications against the eligibility criteria and selects qualifying applicants. Oversubscribed schemes use defined selection criteria to determine which applicants are approved. Applicants who are not selected in the first window may be able to apply in subsequent application rounds if the scheme allows for them.
Step 5: Execution of Agreement
Selected applicants execute a formal agreement with the nodal ministry. This agreement sets out the investment commitments, annual sales targets, compliance obligations, reporting timelines, and the consequences of non-performance or misrepresentation.
The agreement is a binding legal document. Manufacturers should review it carefully before execution, with particular attention to the representations made about investment plans, manufacturing capacity, and IP assets. Misrepresentation in a PLI application or agreement results in full recovery of all incentives paid, plus penalty.
Annual Compliance Under PLI
PLI incentives are not disbursed automatically. Each year, the beneficiary must submit an annual compliance report to the nodal ministry, demonstrating that:
- The committed incremental investment was made during the reporting period
- The minimum incremental sales threshold for that year was achieved
- The manufacturing facility was operational and producing eligible products
- There were no material changes to the legal entity structure or ownership without prior approval
- IP commitments made at application stage (where applicable) were maintained
The compliance report must be supported by audited financial statements, sales invoices, investment documentation, and, where relevant, IP registration certificates. The nodal ministry verifies the report before disbursing the incentive for that year.
The compliance obligation runs for the full duration of the incentive period, which is typically five to seven years depending on the scheme. Manufacturers must establish internal processes for tracking and documenting PLI-relevant data throughout the year, not just at the reporting deadline.
FDI and PLI: How Foreign Companies Can Participate
Foreign companies cannot participate in PLI schemes directly. All PLI applicants must be Indian legal entities. A foreign manufacturer that wants to access PLI incentives must either establish a wholly owned subsidiary in India or enter a joint venture with an Indian partner.
Foreign Direct Investment into PLI-eligible sectors is permitted under the automatic route for most sectors, meaning prior government approval is not required. The Indian subsidiary or joint venture entity then applies for PLI in its own name and is the entity that executes the PLI agreement.
The ownership structure of the Indian entity must comply with sector-specific FDI limits. Defense manufacturing, for example, has a separate FDI regime that intersects with PLI eligibility. Foreign companies should confirm both FDI compliance and PLI eligibility before committing to an investment structure.
Joint ventures raise additional considerations around IP ownership, technology transfer, and profit repatriation. These must be addressed in the JV agreement before the PLI application is submitted. Altacit Global advises foreign companies on FDI structuring, JV documentation, and PLI eligibility assessment as an integrated service. For more information, see our Corporate D3 (FDI) and Corporate C3 (Joint Ventures) resources.
Qualify for PLI With the Right Legal Framework
The Production Linked Incentive scheme offers manufacturing companies a rare combination: government-backed financial incentives tied directly to production performance. The opportunity is real, but it is conditional on meeting precise legal requirements at every stage, from entity structure and IP ownership at application, to investment tracking and sales documentation throughout the incentive period.
Altacit Global advises manufacturing companies and foreign investors on the full range of PLI-related legal requirements, including eligibility assessment, IP strategy alignment, FDI structuring, joint venture documentation, PLI application preparation, and annual compliance reporting. We work with manufacturers across Tamil Nadu, Telangana, and Karnataka, with offices in Coimbatore, Chennai, and Hyderabad.
Contact Altacit Global at info@altacit.com to discuss your PLI eligibility and compliance requirements.
Frequently Asked Questions: PLI Scheme India
Q1: Can a startup participate in a PLI scheme?
Yes, provided the startup meets the eligibility criteria for the relevant scheme. The critical threshold is minimum investment commitment, which is substantial in most sectors. A startup with limited capital may not meet the investment threshold for high-outlay schemes like semiconductors or advanced chemistry cell batteries. Sectors with lower investment thresholds, such as drones or food processing, are more accessible to early-stage companies. The startup must also be incorporated as an Indian legal entity and operate a dedicated manufacturing facility.
Q2: What happens if a PLI beneficiary misses its annual targets?
Missing an annual sales or investment target results in the non-payment of the incentive for that specific year. The beneficiary does not receive PLI disbursement for any year in which it fails to meet the defined thresholds. If the shortfall is accompanied by misrepresentation in the compliance report, the consequences are more severe: the nodal ministry can recover all incentives previously disbursed, plus impose a financial penalty. Beneficiaries who anticipate a shortfall should engage with the nodal ministry proactively rather than submitting inaccurate compliance documentation.
Q3: Can a company benefit from PLI in multiple sectors?
Generally, no. Each PLI scheme requires a separate legal entity dedicated to the manufacturing operations under that scheme. A single company cannot use the same manufacturing facility and legal entity to claim PLI incentives across two different sector schemes simultaneously. A corporate group can establish separate subsidiaries for separate sectors, each applying under its relevant PLI scheme, provided each entity independently meets the eligibility requirements for its sector.
Q4: Is a Joint Venture company eligible for PLI?
Yes. A joint venture company incorporated in India as a private limited or public limited company is eligible to apply for PLI, provided it meets all the eligibility requirements for the relevant scheme. The JV entity must be a separate legal entity, hold the manufacturing assets, and be the contracting party with the nodal ministry. The JV agreement must be structured to ensure that IP ownership, technology contributions, and investment commitments are clearly allocated between the JV partners. Altacit Global advises on JV structuring for PLI-eligible sectors, covering both the corporate documentation and the PLI application process.
