On July 15, 2026, alongside its approval of India Semiconductor Mission 2.0, the Union Cabinet cleared a separate Mobile Phone Manufacturing Scheme (MPMS) worth ₹62,500 crore, a five-year program meant to succeed the Production Linked Incentive (PLI) scheme for large-scale electronics manufacturing, which ended on March 31, 2026. Union IT Minister Ashwini Vaishnaw said the new scheme ties incentives more closely to domestic sourcing, design, and Indian brand ownership than its predecessor did, according to ThePrint’s report on the Cabinet briefing.
How the Incentive Structure Works
MPMS pays performance-linked incentives of between 2.25% and 5% on eligible sales of mobile phones manufactured in India, with the top rate reserved for Indian brands. On top of that base rate, manufacturers can earn up to an additional 1.5% for sourcing components and sub-assemblies domestically, and Indian brands investing in product design and R&D can earn a further 3%. Vaishnaw noted this is the first time the incentive structure is tied to brand ownership rather than purely to production volume, a tiered design intended to reward deeper localisation rather than simple assembly-line output.
Why the Mobile Phone Manufacturing Scheme Replaces PLI
The Mobile Phone Manufacturing Scheme was finalised after roughly eight months of consultation with industry stakeholders, according to The Hindu BusinessLine, following concerns that the outgoing PLI scheme had not done enough to scale up domestic value addition. Rather than extend PLI’s flat, volume-based payout model, the government moved to a scheme that rewards higher-value activity: components sourced locally and design or R&D work carried out by Indian-owned brands, alongside continued production incentives.
The Numbers Government Is Targeting
- Cumulative mobile phone production of about ₹39 lakh crore over the scheme’s tenure, up from ₹22 lakh crore achieved under PLI.
- Mobile phone exports of roughly ₹15 lakh crore, compared with about ₹7.5 lakh crore under the previous scheme.
- Around 60,000 direct jobs generated in mobile manufacturing and related sectors.
- A five-year run from FY2026-27 through FY2030-31.
- Formal notification of the scheme expected within about 20 days of the Cabinet approval, per the minister’s comments.
What Manufacturers Need to Do to Qualify
Under the incentive design described by the government, a manufacturer’s payout depends on layering several conditions rather than simply hitting a production number. The base 2.25% to 5% band on eligible sales already varies by whether the brand is Indian-owned, so the first qualifying step is establishing brand ownership status. From there, manufacturers that also source components and sub-assemblies domestically can add up to 1.5 percentage points, while Indian brands that can document design and R&D investment can add a further 3 percentage points on top of that. In practice, that means two companies producing an identical volume of phones could end up with very different incentive payouts depending on where their components come from and how much original design work sits behind the device.
That stacked structure is a deliberate departure from PLI, which paid out largely on the basis of incremental production and investment thresholds regardless of how much of the value chain sat inside India. Under this incentive design, a contract manufacturer assembling imported components for a foreign brand would likely sit near the base incentive band, while an Indian-owned brand investing in local sourcing and in-house design work could stack all three components and reach the top of the range. Whether global contract manufacturers restructure their India operations, or bring more component sourcing and design work in-house, to chase the higher bands will be one of the clearest early signals of whether the incentive design is working as intended.
Why This Matters for Indian Smartphone Brands
India’s mobile phone manufacturing base grew rapidly under PLI, but a large share of that growth came from global brands assembling devices domestically rather than homegrown companies building their own intellectual property. By tying a meaningful chunk of the incentive specifically to Indian brand ownership and to design and R&D spending, the Mobile Phone Manufacturing Scheme is explicitly trying to correct that imbalance. Vaishnaw’s comments about wanting to help build “an Indian mobile phone brand” point to an ambition that goes beyond assembly-line jobs: the government wants at least part of the next five years of growth to translate into Indian-owned intellectual property, patents, and export revenue rather than purely contract-manufacturing volume.
PLI vs Mobile Phone Manufacturing Scheme
| Aspect | PLI (2020-2026) | MPMS (FY2026-27 to FY2030-31) |
|---|---|---|
| Outlay design | Volume-linked flat incentive structure | Tiered 2.25%-5% incentive with brand-ownership weighting |
| Cumulative production | ~₹22 lakh crore achieved | ~₹39 lakh crore targeted |
| Exports | ~₹7.5 lakh crore achieved | ~₹15 lakh crore targeted |
| Domestic sourcing bonus | Not a distinct bonus category | Up to +1.5% for local component/sub-assembly sourcing |
| Design/R&D bonus | Not a distinct bonus category | Up to +3% for Indian brands’ design and R&D investment |
| End/succession | Ended March 31, 2026 | Formally succeeds PLI-LSEM from FY2026-27 |
What’s Still Unclear
Several operational details of MPMS remain to be published. The government said formal notification would follow within about 20 days, meaning the precise sales-tier thresholds, application windows, and disbursement schedule were not yet public as of the Cabinet announcement, per Financial Express. It is also not yet clear exactly how “Indian brand” will be legally defined for purposes of the top incentive tier and the design/R&D bonus, or how companies transitioning out of PLI-linked commitments will be treated during the handover period between the two schemes.
Limitations and Open Questions
The ₹62,500 crore outlay and the production and export targets are government projections for the scheme’s five-year window, not guaranteed or independently audited results. Actual outcomes will depend on global smartphone demand, competing manufacturing hubs such as Vietnam, and how quickly companies restructure supply chains to qualify for the domestic-sourcing and design bonuses. The scheme notification, once published, may also refine or adjust the incentive percentages and eligibility rules described in the July 15 Cabinet briefing.
Reader FAQ
What is the Mobile Phone Manufacturing Scheme?
It is a ₹62,500 crore, five-year Indian government scheme approved July 15, 2026 that pays performance-linked incentives to mobile phone manufacturers, with bonuses for domestic sourcing and design/R&D by Indian brands.
How does it differ from PLI?
Unlike PLI’s more uniform, volume-linked payouts, MPMS scales incentives by brand ownership and rewards domestic component sourcing and design/R&D investment with additional bonus percentages.
Who benefits most from the new structure?
Indian-owned brands investing in local design, R&D, and component sourcing are positioned to receive the highest combined incentive rates under the scheme’s tiered design.
When does the Mobile Phone Manufacturing Scheme start?
It runs from FY2026-27 through FY2030-31, with formal notification expected within about 20 days of the July 15, 2026 Cabinet approval.
Bottom line: The Mobile Phone Manufacturing Scheme swaps PLI’s volume-first approach for one that pays extra for local sourcing, design, and Indian brand ownership, with far higher production and export targets. The framework and numbers are set; the fine print on eligibility and disbursement is still due within weeks of the Cabinet approval.
Primary sources
- Cabinet clears Rs 1.9 lakh crore for chip & mobile manufacturing — ThePrint
- Cabinet unveils Rs 1.9 lakh-crore high-tech push — The Hindu BusinessLine
- India’s MPMS gets Rs 62,500 cr push, targets Rs 39 lakh cr output — Financial Express
- India approves Rs 62,500 crore MPMS to boost exports and jobs — The Economic Times
Related Topic Express coverage
Featured image: Photo via Unsplash (photo-1511707171634-5f897ff02aa9); free to use under the Unsplash License. Illustrative only.
