Production Linked Incentive Scheme: Meaning, Full Form, Sectors of PLI Scheme UPSC

By BYJU'S Exam Prep

Updated on: November 14th, 2023

Production Linked Incentives (PLI) Scheme offers incentives to companies based on incremental sales in domestic facilities. The PLI scheme guarantees 4-6 % incentives to companies for the step-by-step sale of manufactured goods in the country. The PLI scheme was designed to increase domestic manufacturing capacity, together with increased import substitution and job creation.

The government has allocated Rs. 1.97 lakh crore under the PLI Schemes for various industries, and the Budget for 2022–2023 included an extra allocation of Rs. 19,500 crores for PLI for solar PV modules. One needs to be updated with the Government Schemes to be fully prepared for the upcoming IAS Exams.

Production Linked Incentive Scheme [PLI Scheme]

The Government of India’s Production Linked Incentive or PLI scheme is a sort of performance-linked incentive that rewards businesses for additional sales of goods produced domestically.

Its objectives are to increase production and lower imports. The PLI schemes’ goals include Make in India, which encourages foreign manufacturers to begin production there and domestic firms to increase production and exports. Production Linked Incentive Scheme was first established in April 2020 for the Large Scale Electronics Manufacturing sector, but it was later expanded to include 10 other sectors at the end of 2020.

Production Linked Incentive Scheme Notes

The Atmanirbhar Bharat initiative in India inspired the introduction of this program. PLI’s primary industry focus was on the production of medical devices, electrical components, and mobile and related component manufacturing.

Production Linked Incentive Scheme – Details

PLI scheme guarantees 4-6 % incentives to companies for the step-by-step sale of manufactured goods in the country. This has attracted giants in every sector to set up their manufacturing units in India and expand their business. This does not mean that the domestic units have been liquidated.

Domestic companies are also encouraged to open new manufacturing units, giving more job opportunities and eliminating the country’s import dependency.

Through the PLI scheme, the government is strengthening the economic model by increasing the export-import business and discarding the problem of unemployment as well. The government aims to expand the business of indigenous companies and open a gateway for big foreign investment countries to India.

PLI Scheme Full Form

The PLI Scheme Full Form is Production Linked Incentive Scheme. Production Linked Incentive Schemes are essentially monetary inducements for companies to increase output. These might take the shape of tax breaks, reduced import and export taxes, or looser rules for buying land.

The advantages of a PLI scheme are typically transferred in the form of decreased costs to the final consumers of goods.

Industries Under the PLI Scheme

The following 14 industries are among those for which the government has launched the Production Linked Incentive scheme:

  • Automobile
  • Chemicals
  • White goods
  • Medical devices
  • Auto components
  • Food processing
  • Textiles & Apparel
  • Solar Modules
  • Telecom
  • Renewable energy
  • Pharmaceuticals
  • Aviation
  • Metals & mining
  • Electronic systems

Incentives Under the PLI Scheme

The incentives under the Production Linked Incentive Scheme are based on incremental sales, and they can be as low as 1% for electronics and technology products or as high as 20% for the production of specified drug intermediaries and important key starting medicines.

The incentive to be paid will be determined based on sales, performance, and local value addition over a five-year period in some industries, such as advanced chemical cell batteries, textile products, and the drone industry.

Objectives of Product Linked Incentive Schemes

The PLI scheme was instituted by the government to lessen India’s reliance on China and other foreign nations. The Production Linked Incentive Schemes’ objectives are:

  • It encourages industries that require a lot of labor and seeks to boost India’s employment rate.
  • The PLI Scheme aims to lower import costs and increase domestic manufacturing.
  • PLI Yojana, on the other hand, encourages domestic businesses to increase the size of their production facilities while also inviting foreign businesses to establish units in India.

Eligibility Criteria for Product Linked Incentive Schemes

The eligibility criteria to avail the Production Linked Incentive Scheme are given below.

  • Companies must have a registered manufacturing unit in India.
  • The applicant must touch the inception point to be eligible for the cost of the incentive. INR 10 crore for the Ministry of Micro, Small & Medium Enterprises, INR 100 crore for others, and approximately INR 1000 crore for investment-oriented companies.
  • The applicant can open a new unit or take an incentive for operating the existing unit.
  • The scheme would support resource-friendly expenditure, including machinery, equipment, and technical enhancement, and would avoid expenditure for land and building.

The eligibility criteria vary for different sectors under the PLI scheme.

Working Model of Product Linked Incentive Scheme

Initially, the scheme aimed at mobile and associated constituents manufacturing, electrical components manufacturing, and medical equipment. Later, other sectors were added. The PLI scheme is a five-year action plan with the base year of 2019-20.

The working module of the following major sectors is discussed below:

Pharmaceutical and Medicine Tool Manufacturing

  • The Indian pharmaceutical industry contributes about 3.5% of the total medicines and drugs in the world.
  • The Department of Pharmaceuticals is leading this scheme.
  • The PLI scheme for bulk drugs grants an expenditure of 6940 crores, and the PLI scheme for manufacturing pharmaceuticals grants an expenditure of 15,000 crores.
  • The aim is to produce high-value products in the global market and boost the drug-making capacity at the global level.

Mobile Phones and Associated Constituents

  • The Production Linked Incentive Scheme was started from this domain.
  • The scheme’s main aim is to attract global electrical giants like Samsung, Pegatron, Flex, and Foxcom to expand their presence in India by increasing the number of manufacturing units.
  • Under the scheme, companies that manufacture mobile phones of INR 15,000 and above will get an incentive of up to 6% on the step-by-step sale of such mobile phones in India.
  • Since the scheme was launched, many budget category companies like Lava, Karbonn, and Dixon have also increased their sales, while South Korean company Samsung, Taiwan’s Pegatron, and Singapore’s Flex have shown considerable interest.

Telecommunication and Networking Gadgets

  • The PLI scheme for telecommunication and networking gadgets aims to provide 40000 job opportunities with an investment of around INR 3345 crores by 31 companies (including domestic and foreign companies).
  • The companies would get incentives of around 4% to 7% on the step-by-step sale of manufactured goods, including core transmission equipment, wireless accessed equipment, 4G and 5G channels, routers, and switches.

Textiles and Clothing

  • The scheme aims to provide around 11% incentives for manufactured goods, including Man-made textiles and Technical textiles, on incremental sales, which is the highest among all other sectors.
  • To date, 61 out of 67 applications have been accepted, and the import duty on cotton is turned to zero.
  • The scheme outlay is estimated to be INR 10,683 crores.

Food Products

  • The PLI scheme for Food production and processing aims to increase the productivity of ready-to-cook and eat food products and increase the availability and processing of food in rural areas.
  • The estimated scheme outlay is INR 10900 crore.
  • The scheme targets this product line which includes honey, vegetables, mozzarella cheese, desi ghee, etc.

Automotive and Auto Components

  • The total outlay of the Production Linked Incentive Scheme in this sector is estimated to be INR 25938 crores.
  • The PLI scheme provides incentives of 18% for manufacturing advanced automobile components on an incremental basis for 95 companies, which have been selected under this scheme.

Metals and Metallurgy

  • The Ministry of Steel has calculated a total layout of around INR 6322 crore for the PLI scheme in this sector.
  • The primary aim is to improve exports and enhance manufacturing capabilities to overrule the global market. The Ministry has distributed the incentives in 3%, 6%, and 9% for the manufacturers.

Benefits of the PLI Scheme

The benefits of the Production Linked Incentives scheme are as follows:

  • Introduction of non-tariff rules to increase the rate of imports.
  • Increase job opportunities as it has around 10 sectors.
  • Identify the target product and increase its manufacturing units.
  • Development of domestic industries by giving incentives.
  • Aim to form a stable economy.

Challenges Faced Under the PLI Scheme

Though the Production Linked Incentive Scheme is a great initiative for the Indian economy, the scheme has certain drawbacks and challenges. These are:

  • No Common Set of Parameters: To comprehend the value addition by enterprises that have received or are anticipated to receive incentives under the PLI system, there is no uniform set of parameters. There are no means of comparing two separate PLI schemes at this time because different ministries each keep track of the value addition of their own programs.
  • The goal for Businesses for Incentives too High: Ministries and departments that work with businesses in their industry also confront a number of unique problems. For instance, the threshold for enterprises to qualify for incentives can occasionally be excessively high.
  • Domestic Businesses Relied on One or Two Supply Chains: Among the fourteen companies approved in the previous fiscal year, only three to four were able to meet the incremental sales goals necessary to be eligible for the PLI scheme. Most domestic enterprises, unlike multinational corporations, were dependent on one or two distribution networks.


The PLI scheme is designed to reward increasing productivity. PLI can improve building systems to adapt to climate change and even fundamentally counteract it in the many years to come because of the uniqueness and specificity of Production Linked Incentives-related sectors, which generally include a cautious and attentive emphasis on manpower and creating.

Production Linked Incentives Scheme is one of the aspirational Government Schemes launched by the government. Candidates must comprehensively understand and learn all the relevant information linked to the scheme to score better marks.

Questions on Production Linked Incentives Scheme

Candidates can also download the UPSC Previous Year Question Papers to analyze the types of questions asked from the topic.

Question: Consider the following question and choose the correct option below-

  1. LG is a manufacturing unit in India and has shown interest in the scheme.
  2. 22 companies have registered for the PLI Scheme in India.

Choose the correct option

a] 1 only, [b] 2 only, [c] 1 and 2 both, [d] None of the above

Answer – LG is a manufacturing unit in India and has shown interest in the scheme, and 22 companies have registered for the PLI Scheme in India.

Question for Mains: Examine critically how the recently implemented Production Linked Incentive (PLI) plan helps the Indian textile industry gain a competitive edge.

Question for Mains: Describe the PLI Scheme’s operation. What are the benefits and drawbacks of the scheme?

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