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What is Production Linked Incentive (PLI) scheme? Meaning and benefits for exporters

PLI scheme is a government initiative designed to boost domestic manufacturing and enhance exports. Learn its benefits, eligibility, and its working in the blog.
What is Production Linked Incentive (PLI) scheme? Meaning and benefits for exporters
Indian exporters today are tapping into new global opportunities with growing confidence, supported by a stronger manufacturing base and proactive government initiatives. One such initiative is the Production Linked Incentive (PLI) scheme — an ambitious effort to make domestic production more competitive by offering financial incentives linked to incremental output. For sellers looking to expand their export footprint, the PLI scheme presents a powerful opportunity to scale efficiently, improve product quality, and meet global demand.

In this blog, we will explain what the PLI scheme is, its objectives, how it works, the sectors it covers, and its benefits for exporters aiming to grow their presence worldwide.

What is the Production Linked Incentive scheme (PLI scheme)?

The Production Linked Incentive (PLI) scheme is a government initiative launched in 2020. The primary aim was strengthening India’s manufacturing capabilities by offering financial incentives to eligible companies based on their incremental sales.1

The scheme initially targeted three sectors — mobile manufacturing and specified electronic components, pharmaceutical ingredients, and medical devices. Over time, it has expanded to include 14 sectors ranging from electronics and textiles to automobiles and food processing.2

Objectives of Production Linked Incentive scheme

The PLI scheme has several clear and targeted objectives:
● Boosting domestic manufacturing: The primary goal is to significantly increase domestic production capacity across targeted sectors, making India less reliant on imports for critical goods.
● Attracting investment: The scheme aims to draw substantial investments, both foreign and domestic, into the identified key sectors and cutting-edge technology areas.
Enhancing exports: By improving cost competitiveness and scale, the PLI scheme seeks to make Indian manufactured goods more attractive in global markets, thereby increasing exports.
● Encouraging sustainable development: The scheme intends to foster the creation of sustainable, globally competitive manufacturing leaders.
● Integrating with global supply chains: It encourages Indian companies to become integral parts of complex global supply chains.3

Did you know?

India recorded $48 billion in total exports from PLI-supported sectors by FY2023, showcasing its manufacturing boost under the scheme.

How does the Production Linked Incentive scheme work?

The PLI scheme is designed to be performance-driven and relatively straightforward, although specific parameters vary by sector. Here’s a general breakdown:

1. Base year:

A specific financial year is designated as the base year for calculating incremental sales. For instance, for many initial schemes, the base year is 2019–20.

2. Incremental sales calculation:

The incentive is calculated based on the increase in sales of manufactured goods (produced in India) over the base year’s sales figure. Companies must meet minimum incremental sales thresholds to qualify for the incentive each year.

3. Incentive rate:

A predetermined percentage (e.g., 4% to 6%, or varying over the scheme period) is applied to the calculated incremental sales. This rate is specific to the sector and sometimes linked to the level of localization or value addition achieved.

4. Eligibility thresholds:

Companies usually need to meet certain criteria regarding investment commitments or existing revenue size to be eligible to apply for a specific PLI scheme.

5. Scheme duration:

The incentives are typically disbursed annually for a period of four to six years, following the initial investment and commencement of increased production.

6. Application and approval:

Companies apply through a dedicated portal when a scheme for their sector is announced. Applications are evaluated based on the defined criteria, and approvals are granted by the relevant government ministry or department managing that sector’s scheme.

7. Disbursement:

Incentives are disbursed after verification of sales data and compliance with scheme guidelines for the relevant year.4

Sectors covered under Production Linked Incentive scheme

Recognizing the need for broad-based industrial growth, the Government of India announced PLI schemes for 14 key sectors in 2023. These sectors were identified based on their potential for growth, job creation, and strategic importance. They include:
● Mobile manufacturing and specified electronic components
● Critical Key Starting Materials (KSMs)/Drug intermediates and Active Pharmaceutical Ingredients (APIs)
● Manufacturing of medical devices
● Automobiles and auto components
● Pharmaceuticals drugs
● Specialty steel
● Specialty steel
● Telecom and networking products
● Electronic/Technology products
● White goods (ACs and LED)
● Food products
● Textile products: Man-Made Fibre (MMF) segment and technical textiles
● High-efficiency solar PV modules
● Advanced Chemistry Cell (ACC) battery
● Drones and drone components5

Incentives under Production Linked Incentive scheme

The incentive rates vary across sectors but are typically between 4 and 6% of the incremental sales. Some sectors receive even higher incentives based on strategic value. These incentives are disbursed annually for a set period of years from the base year.
Electronic/Technology products: 1% to 4% for a period of four years
Pharmaceuticals: 3% to 10% for a period of six years
Food products: 4% to 10% for a period of six years.
The incentive is subject to annual review and compliance with performance metrics defined by the nodal ministries.6

Benefits of Production Linked Incentive scheme

Exporters and manufacturers stand to gain significantly from the PLI scheme. Some key benefits include:

Incentivized growth:

Manufacturers receive direct financial support of 4% to 6% on incremental sales, which strengthens profit margins and promotes large-scale production.

Export-led expansion:

Sectors like electronics, pharmaceuticals, and telecom have witnessed significant growth in export volumes, driven by cost efficiencies and improved manufacturing scale.

Promotion of advanced technologies:

The scheme encourages the adoption of modern manufacturing techniques and automation, leading to better product quality and reduced operational inefficiencies.

Enhanced global competitiveness:

With structured incentives, businesses can lower their cost base, making Indian products more price-competitive in global markets.

Integration into global supply chains:

By enabling scale and technology upgradation, the scheme positions businesses to become key players in global supply chains, especially in high-growth sectors.7

Eligibility for Production Linked Incentive scheme

Eligibility criteria for the PLI scheme are specific to each sector for which a scheme is announced. However, some general parameters often apply:
● Company registration: Applicants must typically be companies registered in India.
● Investment threshold: Many schemes require applicants to commit to a minimum threshold of cumulative investment in plants, machinery, research, etc., over the scheme period.
● Net worth criteria: Some schemes may have minimum net worth requirements for applicant companies.
● Incremental sales targets: The core eligibility revolves around achieving stipulated year-on-year incremental sales growth over the base year.
● Manufacturing presence: The scheme is applicable only for manufacturing activities undertaken within India.
● Sector-specific criteria: Additional requirements related to localization, value addition, or product type may be specified in individual sector guidelines.8

Documents required for Production Linked Incentive scheme

Applicants need various documents to apply for PLI schemes, including:
● Certificate of incorporation
● Detailed business plan with production targets
● Audited financial statements
● PAN card
● GST number
● Memorandum of association9

Application process for Production Linked Incentive scheme

The application process for PLI schemes is generally managed online through portals set up by the respective implementing ministries or departments. The typical steps involve:
Application process for Production Linked Incentive scheme

● Scheme notification:

The ministry concerned issues detailed guidelines and announces the opening of the application window for a specific sector’s PLI scheme.

● Portal registration:

Interested companies register on the designated online portal.

● Application submission:

Applicants fill out the detailed online application form, providing information about the company, proposed investments, sales projections, etc., and upload the required supporting documents.

● Evaluation:

The relevant authorities evaluate the applications based on the predefined eligibility and selection criteria.

● Approval:

Eligible applicants receive formal approval letters outlining the terms and conditions, incentive rates, and duration.

● Claim submission:

Once production commences and incremental sales are achieved, companies submit annual claims for incentives along with supporting documents (like sales certificates, auditor certificates).

● Verification and disbursement:

The concerned ministry verifies the claims, and upon satisfaction, the eligible incentive amount is disbursed to the company’s bank account.10

Conclusion

The Production Linked Incentive scheme positions India as a competitive manufacturing destination. By incentivizing scale, innovation, and export capability, the scheme helps businesses grow faster, reduce import reliance, and create jobs across the value chain. Exporters can use this opportunity to expand into global markets and contribute to India’s economic growth story.

For businesses aiming to leverage these manufacturing advancements for global expansion, exploring e-commerce export can be a beneficial next step. Programs like Amazon Global Selling provide Indian manufacturers and exporters with direct access to millions of customers across international marketplaces, simplifying logistics, payments, and compliance, thereby complementing the goals fostered by the PLI scheme.

Amazon Global Selling: Easy e-commerce exports and hassle-free shipping

If you are a business owner and you want to sell your products to the world, Amazon Global Selling enables you to list and sell ‘Made in India’ products on 18 Amazon global marketplaces. As an e-commerce export program, Amazon Global Selling provides support and guidance at every step of your export journey, connecting you to Amazon’s Service Provider Network for tailored compliance, payments, and logistics support.

Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfillment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.

Frequently Asked Questions

1. What is the purpose of the PLI scheme?
The PLI scheme aims to boost domestic manufacturing, reduce import dependency, and enhance exports by providing financial incentives to companies based on their incremental production.
2. Who implements the PLI scheme?
PLI schemes are implemented by respective ministries such as the Ministry of Electronics and IT, Department of Pharmaceuticals, and Ministry of Commerce, depending on the sector.
3. What is the period of the PLI scheme?
The standard period of the PLI scheme is five years from the base year of production, although it may vary slightly based on sector-specific guidelines.
Published on June 28, 2025.

Sources:
1. https://cleartax.in/glossary/pli-scheme
2. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1945155
3. https://www.nextias.com/blog/production-linked-incentive-pli/#Objectives_of_the_Production_Linked_Incentive_PLI_Scheme
4. https://steel.gov.in/sites/default/files/2025-04/PLI%20Steel%20Report_Final.pdf
5. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1945155
6. https://www.india-briefing.com/news/what-are-production-linked-incentive-schemes-and-how-will-they-build-up-indias-manufacturing-capacity-23538.html/
7. https://www.nextias.com/blog/production-linked-incentive-pli/
8. https://www.myscheme.gov.in/schemes/dot-pli-scheme#eligibility
9. https://medicaldeviceregistration.com/production-linked-incentive-scheme/
10. https://www.indialawoffices.com/legal-articles/how-apply-for-pli-scheme-manufacturing-automobile-auto-components-india

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