Revised 26 October 2026 · v1.0.0 · what changed

The scheme that replaces the smartphone PLI does not pay what its headline suggests. Guidelines issued by MeitY on 6 October 2026 for the new Mobile Phone Manufacturing Scheme (Target Segment-1) set a base rate of 2.75% in the first two years, falling to 2.25% by FY2030-31. But that rate applies to a band of sales that, on a literal reading, is empty for most growing brands. Sales above the band earn 5%, falling to 4%. The old scheme paid 4–6%. So the new one is not much cheaper per rupee of growth; it is harder to qualify for, because a brand must grow more than 15% a year before it earns anything.

The second change is more interesting. On top of the base rate, up to 1.5% more is paid for Indian-made display modules, camera modules, enclosures, batteries and USB cables. The battery slice is 0.20%, and it is paid only if the cell inside is made in India. India imported about US$4.7 billion of lithium-ion accumulators in FY2025-26. This post sets out what the guidelines say, how they differ from the smartphone PLI covered in our 14-PLI post, and what the import data show about the components the scheme wants.

What the scheme pays

The Cabinet approved the Mobile Phone Manufacturing Scheme on 15 July 2026 with an outlay of ₹62,500 crore for five years, FY2026-27 to FY2030-31, according to the official release as reported by Governance Now. It was notified in the gazette on 21 August 2026 (CG-DL-E-21082026-275648). The guidelines (para 13.1) state the outlay for both target segments together as ₹62,300 crore, ₹200 crore less than the Cabinet figure. The gazette notification itself (Part I, Section 1, CG-DL-E-21082026-275648, read in the Gazette of India’s own text via the SansadSaar index of the archive.org Gazette of India collection) gives the outlay as “₹62,500 crores, including administrative charges”, fungible between the two target segments, so the Cabinet figure is the scheme total; the ₹62,300 crore in the guidelines is consistent with about ₹200 crore going to administration, though the gazette does not state that amount. The outlay is also “fund limited” and shared between Target Segment-1 (global brands made in India) and Target Segment-2 (Indian brands), so the Segment-1 share is not fixed.

Paragraph 9.1 of the guidelines sets two rates for each year. I read the rates directly from the scanned page:

The band in para 9.1(i) runs “up to the difference between the average sale of FY 2025-26, FY 2024-25 and FY 2023-24 and the Baseline Sales” for the year. Baseline sales (para 2.15) are the brand’s sales in the preceding year plus 15%, so the baseline moves up every year. Eligible sales are total sales minus that baseline.

The hurdle: 15% growth, then ₹5,000 crore a year more

Two tests must be met before any incentive is paid. First, a brand must beat its moving baseline: sales more than 15% above last year’s. A brand growing 12% earns nothing. Second, para 6 sets a threshold of additional sales over the FY2025-26 level: ₹5,000 crore in FY2026-27, rising by ₹5,000 crore each year to ₹25,000 crore in FY2030-31. A new brand becomes eligible only once its India sales pass ₹10,000 crore in a year. The applicant must also have global turnover, with group companies, of at least ₹10,000 crore in FY2025-26 (para 3.1).

An illustration, with an invented brand: sales of ₹30,000 crore in FY2025-26. Its FY2026-27 baseline is ₹34,500 crore and its threshold is ₹35,000 crore. If it hits the threshold exactly, eligible sales are ₹500 crore and the incentive at 5% is ₹25 crore. Growth is rewarded, but only the part above 15%.

The old scheme worked differently. It paid 4% to 6% on net incremental sales, measured against a fixed base year (FY2019-20), for five years from that base year, according to PIB (release 1884069 for the base year). A fixed base meant every rupee above FY2020 earned the incentive. A base that resets to last year plus 15% moves the goalposts every year, so the headline rate overstates what a brand actually collects.

What the old scheme cost and delivered

The old scheme, PLI for Large Scale Electronics Manufacturing, had an original outlay of ₹38,645 crore, per the same PIB release. In a Lok Sabha reply of 29 July 2026 MeitY put the incentive outlay at ₹34,139 crore and the amount disbursed as of March 2026 at ₹19,091 crore, about 56% of the outlay. Against that, the reply reports cumulative sales of ₹11,61,581 crore (143% of the ₹8,12,550 crore target), exports of ₹6,53,745 crore and investment of ₹20,587 crore, three times the ₹7,000 crore target. Direct jobs of 1,69,150 fell short of the 2,00,000 target.

The same reply gives domestic value addition in mobile manufacturing as rising from about 15% to about 23% over the scheme tenure. A PIB release of 1 April 2026 says industry estimates put electronics value addition at 18–20%. These are different measures from different documents, and neither is audited in the sources I could read. They explain the policy shift. Assembly is largely done; the value that remains abroad is in the parts.

The component rates, and the conditions that matter

Paragraph 10 lists five rates, added to the base rate on eligible sales. They total 1.5%:

Three conditions limit the money. A brand must source at least 25% of its units of that component domestically in the year. The extra is then paid pro rata to the localisation share, so a brand at 30% localisation collects 30% of 0.30% on camera modules (para 10, illustration 1). And it is paid only on phones made in India for sale, so cells exported for other uses do not earn it (illustration 2). The incentive is on eligible sales, not total sales, so the extra rates are applied to the same small increment as the base rate.

For scale: MeitY puts FY2025-26 mobile phone production at about ₹6.27 lakh crore. Applied to that whole figure, 0.20% is about ₹1,254 crore. Eligible sales will be a fraction of production, so the battery reward will be a fraction of that. Whether 0.2% is enough to justify a cell plant is something this post cannot answer. No source I read gives the cost of a phone-cell line, and I have not guessed.

What India imports of the parts the scheme names

I pulled India’s FY2025-26 imports at 8-digit level from DGCI&S TradeStat, in US$ million. India’s total merchandise imports in that table are US$775,713 million.

Display modules (8524) were 0.72% of all imports and lithium-ion accumulators 0.61%. The smartphone lines are small next to the totals; the OLED lines are the larger part and grew fastest.

What to watch

The scheme’s own design tells you what it expects. Applications opened on 15 October 2026 and stay open to 31 March 2029 (para 14.2), and claims can be filed quarterly with a bank guarantee for early payment (para 20.2). The first real evidence will be which brands apply, and what localisation share they commit to in their applications. MeitY has not published the 2.75% band as a worked example. It should, along with the Segment-1 share of the ₹62,300 crore or ₹62,500 crore and a plain statement of which one is right.

Sources: MeitY, Scheme Guidelines for Operation of the Mobile Phone Manufacturing Scheme, Target Segment-1, 6 October 2026 (scanned; rates read by OCR and checked against the page image); Governance Now, 15 July 2026, reporting the Cabinet release; Lok Sabha Unstarred Question 1695, 29 July 2026; PIB, PLI for Large Scale Electronics Manufacturing, 4–6% rate and original outlay; PIB, 1 April 2026, domestic value addition; DGCI&S TradeStat, commodity-wise imports, FY2025-26 (provisional). Gazette of India, Extraordinary, Part I, Section 1, Mobile Phone Manufacturing Scheme (MeitY, 21 August 2026), CG-DL-E-21082026-275648 (egazette.gov.in/WriteReadData/2026/275648.pdf), read in the Gazette of India’s own text via the SansadSaar index of the archive.org Gazette of India collection; its OCR confirms the ₹62,500 crore outlay including administrative charges, the five-year tenure, the ₹5,000–25,000 crore threshold schedule, the ₹10,000 crore entry level for new brands, the baseline of last year’s sales plus 15% and the 2.75% band rate for FY2026-27 and FY2027-28; the remaining rates in the table are illegible in the OCR and stay as read from the guidelines. The 5%-for-most-growth reading is mine.

About this article: Researched, written and edited by Umashankar Triplicane Dwarakanathan, with AI research assistance; every figure is meant to trace to the primary source cited. See the Editorial Policy for how sourcing, AI use and corrections work.