In 2020, the government offered Indian factories a deal. A company that picked a product from a government list, spent a set minimum on its plant, and sold more than it had in a fixed earlier year would receive a percentage of the extra sales for five years.

Because the payment follows output, the programme is called the production-linked incentive, or PLI.

It grew into fourteen schemes worth Rs 1.97 lakh crore, from phones, cars and medicines to textiles, steel, solar panels, battery cells and drones, making it one of India's largest industrial subsidies.

The first round is now closing scheme by scheme.

The large-scale electronics scheme for phones ended on March 31, 2026; in July the Cabinet approved a Rs 62,500 crore successor. The February Budget had already raised the scheme for the components inside those phones to Rs 40,000 crore; the textiles ministry said in July it would reopen applications once more.

India has started the second round before finishing the first, even as the first has paid out little of what it promised.

The commerce ministry's latest figures put disbursements at Rs 36,754 crore by 30 June 2026, or 18.7% of the amount announced, in the seventh year of a programme meant to run for five.

Against the Rs 1.91 lakh crore the ministry now counts as approved, the share is 19.2%. Rs 15,519 crore of it went out in 2025-26 alone.

This matters because the next round is being built the same way. Where the first round's money went, and why most of it was never paid, shows what the new schemes can expect.

How The Money Is Spread

The sector breakdown released by the industry department in September shows where it went.

Phones and other finished electronics are the largest recipient by far. The phone scheme, which also covers some electronic components, has paid Rs 19,091 crore. That is nearly half of the Rs 40,995 crore set aside for them, and more than half of everything the PLI has paid out.

Laptops, tablets and servers have a separate IT hardware scheme worth Rs 17,000 crore. It has paid only Rs 98 crore.

Pharmaceuticals come second. The Rs 15,000 crore pharmaceuticals scheme pays companies for making higher-value finished medicines, such as complex generics and cancer drugs. It has paid Rs 6,662 crore, a share close to that of phones.

Food processing is third, with Rs 3,271 crore, or about 30% of its money. Together, the top three have taken 79% of all payouts.

After that, the numbers fall away quickly. Cars and car parts have received Rs 3,174 crore of an outlay of about Rs 26,000 crore. White goods, such as air conditioners and LED lights, have received Rs 593 crore of Rs 6,238 crore.

Speciality steel, used in defence, cars and power equipment, has received Rs 236 crore of Rs 6,322 crore. In proportion, that is about a twelfth of what phones got, under a scheme with the same design.

Medical devices, whose import bill I wrote about in September, had received Rs 157 crore of Rs 3,420 crore by December. Batteries and solar have received nothing.

What A Company Has To Clear

Each scheme sets a minimum investment and a sales target for every year it pays, with sales measured against a fixed base year, 2019-20 in the case of the phone scheme. Both must be met in the same year. Several schemes also require a minimum share of the product’s value to be made in India.

A company that meets these targets files a claim, which the ministry running the scheme checks against tax records.

The money arrives after the year closes, and in some schemes only a year after the plant starts. So, there are five gates between a finished factory and a paid claim.

In most schemes, a company that misses any gate in a year loses that year's payment for good. It can build the plant, hire workers, start production, and still collect nothing.

Three Kinds Of Unpaid

A total of Rs 1.6 lakh crore has not been paid — about 81% of the Rs 1.97 lakh crore. That unpaid money falls into three groups.

The first is money not yet due. Solar is the clearest case that falls into this category.

The payments start a year after a plant begins production; by February 28, 2026, no approved project had reached that point. The Rs 24,000 crore scheme had therefore paid out nothing, although about 30 GW of panel-making capacity had been built. This money should start to flow as plants pass the one-year mark.

The second is money that has been lost.

Of the five Indian companies picked to make phones, only Dixon's Padget Electronics and UTL Neolyncs met their first-year targets.

Lava, Bhagwati (which makes Micromax handsets) and Optiemus fell short three years in a row, while Foxconn, Wistron and Samsung met their targets.

The first IT hardware scheme drew so few qualifying claims that it was rewritten, with its budget raised from Rs 7,350 crore to Rs 17,000 crore. The new version has paid only about Rs 98 crore so far.

The third is money that will never be claimed because the factories were never built.

The battery scheme set aside Rs 18,100 crore in 2021 for 50 gigawatt hours (GWh) of cell capacity by 2025. By October 2025, only 1.4 GWh had been built, all by Ola Electric.

Even Ola's plant has not qualified for payment. The scheme requires 25% of a cell's value to be added in India within two years, and 60% within five. But most of the materials inside a cell are still imported, which makes these targets hard to meet. Hyundai Global Motor walked away from its 20 GWh share. In August, the heavy industries ministry gave Ola and Reliance until 2031 to finish their plants. It turned down Rajesh Exports, which is under SEBI investigation.

Textiles have struggled to attract investment. To get 170 companies approved, the ministry took applications over three rounds, halved the minimum investment, and cut the required yearly sales growth from 25% to 10%.

Even so, these companies had invested only Rs 8,118 crore by March, about a fifth of what they promised. The Rs 10,683 crore scheme for synthetic fabric, clothing and technical textiles had paid Rs 386 crore by June, under 4% of its budget.

Slow paperwork, with about ten ministries handling claims under a committee of secretaries, slows payments everywhere.

But it cannot explain the payment gap between sectors.

Why The Pattern Looks Like This

An incentive paid on extra sales is easiest to earn where production starts quickly from a low base and the first sales follow soon after.

That fits phone assembly, finished medicines made from bought-in ingredients, and food processing, which turns farm produce into packaged products and has created about 3.35 lakh direct and indirect jobs, among the most of any scheme.

It does not fit a battery cell, a silicon wafer, a speciality steel grade or a scanner's detector.

These need land, imported machines, years to perfect the process and a customer willing to sign on. By then the paying window is closing.

Medicines show the difference most clearly, because there are two separate schemes. The pharmaceuticals scheme pays for finished medicines, and it ranks second in payouts. The bulk drug scheme pays for the active ingredients inside those medicines, which India had been importing, mostly from China. It has paid Rs 88 crore of its Rs 6,940 crore outlay, though it has brought molecules such as penicillin back into Indian production.

The reason is time. Plants for these ingredients take years to stabilise and run smoothly, and the incentive is paid only on sales. The two schemes differ only in how far back in the production chain they aim.

The payout ratio is mainly a measure of what this kind of incentive can buy. It paid best for the final step of making a product and worst for the earliest steps.

Even the last step needed scale behind it, as the Indian phone brands and the first IT hardware scheme found.

The shortfall also shows up in two promises made for the programme: jobs and local value. The schemes created 14.57 lakh direct and indirect jobs by June 30, 2026. The finance minister had projected 60 lakh in her February 2022 Budget speech.

The Indian share of the value of an electronic product made here is 18% to 20% on the government's estimate and 22% to 23% on the electronics secretary's latest count, against the 35% to 40% the government expected by FY26 when the scheme began.

What The Unpaid Money Is Worth

Money that was set aside but not spent was an offer the industry mostly could not take up. The country still bore a cost, in capacity built on the promise that now runs below plan.

Large outlays also make new announcements look bigger than the spending behind them. The components scheme carries Rs 40,000 crore, but the Budget provided Rs 1,500 crore for it this year.

The chip mission's next phase got Rs 1,000 crore, and the Cabinet has since approved it at Rs 1.275 lakh crore.

For listed companies, an incentive booked in the accounts remains a claim until it is paid. EPACK Durable took back Rs 32.42 crore of PLI income after falling short of the scheme's investment and sales conditions, cutting its March-quarter profit to Rs 2.4 lakh from Rs 37.72 crore. The battery and solar awards carry the same risk on a much larger scale.

The Habit Of Rewriting The Scheme

Schemes that struggled have mostly been relaxed rather than closed. The IT hardware budget was more than doubled, the textiles terms were loosened, and the battery awardees were given until 2031.

Even the goal of raising manufacturing to a quarter of the economy, set for 2022 and then 2025, is now described by the commerce minister as a 2047 ambition.

Each change can be justified on its own. Together, they tell industry that terms will move if enough companies miss them, and a company that spent early to clear a hard test ends up no better off than one that waited. Industry carries that lesson into the next Rs 1 lakh crore of schemes.

What The Next Round Should Take From This

Pay for the factory as well as the sales, as the components scheme partly does. The first round lost most of its money in the gap between finishing a plant and selling enough from it.

Match the payment window to how long the product takes to build. Five years suits phone assembly but not a battery plant, or a steel grade that customers take years to qualify.

For slow-to-build products, do not require the spending and sales tests in the same year. A plant that comes good a quarter late should not lose a year's incentive.

Treat repeated reopening as a design fault. The textiles scheme first set an entry bar few could reach, which a consultation with industry in 2021 would likely have shown.

The programme has delivered results to some extent. India assembles phones at world scale, makes medicines it used to import and has solar panel capacity it did not have in 2020. The results are just smaller than advertised.

The successor schemes have taken up some of these lessons, but neither has paid out at scale yet. Both run through the same system that took six years to pay out Rs 36,754 crore. How much of their outlay companies can collect will decide whether they do better.