What Is India's PLI Scheme for Battery Manufacturing

The government reimburses a subsidy per kWh of batteries sold, not upfront. Payout requires hitting domestic value addition thresholds: 25% within two years, 60% within five. The subsidy is capped against a benchmark cost set by an empowered committee, not against the manufacturer's invoice, so inflating the selling price does not inflate the incentive. The five-year incentive window starts at commissioning, not at approval, so construction delays eat directly into the payback period.

This is where the article needs to spend most of its time, because this is where the scheme broke.

Ten companies bid. The evaluation weighted DVA commitments, proposed capacity size, and subsidy benchmarks. Companies that promised higher domestic value addition and asked for lower subsidies per kWh scored better. The winners were Ola Electric (20 GWh), Hyundai Global Motors (20 GWh), Reliance New Energy (5 GWh), and Rajesh Exports (5 GWh).

Exide Industries and Amara Raja, India's two established battery manufacturers, bid and were eliminated.

Start with Hyundai Global Motors. This entity received 20 GWh, which was 40% of the scheme's entire capacity target. Hyundai Motor Company then publicly stated it had no connection to this entity. The allocation collapsed. Of the 20 GWh, 10 GWh was eventually reallocated to Reliance in a September 2024 second auction. The other 10 GWh remains unallotted. Nobody in the evaluation process flagged, before allocating two-fifths of a national strategic initiative, that the bidding entity's relationship to the Korean automaker it appeared to be named after was unclear. How this happened has not been publicly explained by the Ministry of Heavy Industries.

Now Rajesh Exports. This is a gold and jewellery refining company headquartered in Bangalore. It processes raw gold into finished products. Its competence is in precious metals logistics, smelting, and export documentation. It has no battery engineering division, no published electrochemistry research, no technology licensing agreement that was disclosed at the time of selection. It was awarded 5 GWh of advanced chemistry cell manufacturing capacity. As of October 2025, four years into the scheme, Rajesh Exports has acquired land. That is all. Reports of financial discrepancies have surfaced. The company has not responded to government queries. It faces daily penalties of ₹5 lakh. It did not respond to media inquiries.

How did this happen? The evaluation framework scored bidders on the aggressiveness of their commitments. Rajesh Exports committed to high DVA numbers and a low subsidy ask per kWh. On paper, it looked efficient. In any practical assessment of whether a jewellery company could manufacture electrochemical cells, the bid would have been disqualified. The evaluation did not include that practical assessment, or if it did, it did not weigh it enough to matter.

Exide and Amara Raja knew what battery manufacturing involves. They run factories. They have supply chain relationships. They have process engineers. They presumably bid with DVA numbers that reflected what they understood to be achievable given India's nonexistent domestic supply of cathode material, anode material, electrolyte, and separator film. Their bids were realistic. Realistic bids scored lower than aspirational bids from companies with no manufacturing experience.

Both are now building lithium-ion cell plants outside the PLI scheme. Exide signed a technology transfer agreement with SVOLT, a Chinese cell manufacturer. Amara Raja signed with Gotion-InoBat-Batteries. They are proceeding with Chinese technology partnerships, their own capital, their own timelines. Neither is subject to the PLI's two-year commissioning deadline.

The Tata Group, which did not bid in the PLI auction, is constructing a 20 GWh gigafactory in Sanand, Gujarat. At least 10 non-PLI manufacturers have announced combined capacity of about 178 GWh. That is three and a half times the PLI target.

Ola Cell Technologies started building its gigafactory in Pochampalli, Tamil Nadu in May 2023. The plan was four phases to reach 20 GWh by 2026. Phase 1a delivered 1.4 GWh. Phase 1b was supposed to bring it to 5 GWh by February 2025. Phase 2 to 6.4 GWh by April 2025. The company raised ₹5,500 crore through its August 2024 IPO and earmarked ₹1,227 crore for the Phase 2 expansion. An ICRA monitoring report showed none of that money had been deployed.

ICRA downgraded Ola Cell Technologies to BBB- negative in May 2025. Sources reported equipment calibration problems, material consistency issues, cell quality concerns. Ola's founder said the EV market had not grown as expected, and the company would hold at 5 GWh until FY2029. The 20 GWh commitment is abandoned. Ola received ₹73.7 crore in March 2025, the first and only PLI payment to any company. That 1.4 GWh has not met DVA requirements for further claims. The company faces daily penalties of ₹12.5 lakh, accumulating to roughly ₹35 crore.

Ola's scooter market share dropped from 34.8% in FY2024 to 29.9% in FY2025. The parent company is the customer base for its own cells, and that customer base is shrinking. Whether the cells coming off the Pochampalli line meet automotive grade quality standards at scale remains undemonstrated. Ola has announced a proprietary 4680-format cell it calls the Bharat Cell and says it will start using its own cells in scooters. The 4680 is a large-format cylindrical cell that Tesla popularized but has itself struggled to manufacture at target yields. Ola is attempting this format as a first-time cell manufacturer. The ambition is considerable. So is the risk.

Still: Ola is the only PLI beneficiary that has produced a cell. That this qualifies as the scheme's headline achievement says more about the other beneficiaries than about Ola.

Reliance New Energy signed its second-round agreement for 10 GWh in February 2025, with a seven-year period including two years of gestation from July 2025. It says this is on track. Its first-round 5 GWh is delayed. Reliance asked for an extension, was rejected, and faces ₹5 lakh daily penalties.

Outside the PLI scheme, Reliance is building a 40 GWh gigafactory in Jamnagar with plans to reach 100 GWh. For a company of Reliance's size, the PLI allocation of 15 GWh is a side bet. The Jamnagar project is the main one. The delays in the PLI-linked facility may reflect deprioritization as much as execution difficulty. A conglomerate with the balance sheet of Reliance Industries does not need a government incentive of ₹362 crore per GWh to fund a factory. It needs the factory to be technically ready, and that readiness depends on equipment procurement and technology partnerships that are still being assembled.

India has no commercial-scale production of cathode active material, anode material, electrolyte, or separator film. The equipment needed to build a gigafactory, the coating lines, the calendering machines, the electrolyte filling systems, comes predominantly from Chinese manufacturers. The engineers who install and calibrate that equipment are Chinese.

PLI beneficiaries reported that Indian visa approvals for Chinese technicians delayed factory construction. Think about what that means for a moment. The scheme is designed to free India from Chinese battery imports. Building the factories requires Chinese engineers. The visa bureaucracy is blocking the engineers. Nobody in the policy apparatus apparently coordinated between the Ministry of Heavy Industries (which runs the PLI scheme), the Ministry of External Affairs (which oversees visa policy), and the Ministry of Home Affairs (which processes visa applications) to ensure that the technical personnel needed to execute a ₹18,100 crore national priority could enter the country on time.

China's 2023 graphite export restrictions compounded things. Graphite is the standard anode material. India has no synthetic graphite production at scale. The country the scheme is designed to decouple from controls a chokepoint that every PLI beneficiary must pass through to source a basic input.

A Joint Secretary from the Ministry of Heavy Industries said in early 2025 that India could achieve self-reliance in cell manufacturing if lithium is kept in the country through recycling and reused. India's current lithium-ion recycling infrastructure is negligible. The lithium deposit found in Reasi, Jammu and Kashmir generated headlines, and the resource is classified as inferred, in difficult terrain, with no mining infrastructure, years from extraction. Recycling a material that is not yet being manufactured domestically in significant quantities is a circular logic that the Joint Secretary may not have intended but that captures the scheme's predicament.

China built its battery component ecosystem over roughly a decade before the gigafactories reached scale. Cathode precursor plants. Electrolyte production. Separator film manufacturing. Graphite processing. A workforce pipeline from hundreds of thousands of annual chemical engineering graduates. Subsidized industrial power zones. Mineral acquisition programs abroad for lithium and cobalt.

India launched the gigafactory incentive. It did not launch a component manufacturing scheme, a mineral refining program, or a workforce training pipeline alongside it. The Ministry of Heavy Industries started drafting a concept note on supporting component manufacturing in early 2025. Four years after the cell scheme launched. The components were supposed to be the foundation. The foundation is being considered as an afterthought.

The DVA requirement of 25% within two years forces a question: 25% of what? If cathode material is imported, anode material is imported, electrolyte is imported, separator is imported, and the equipment is imported, where does domestic value come from? Factory labor and overhead on a capital-intensive automated line do not add up to 25% of cell cost. To hit that number, a manufacturer needs to source at least some major input domestically. The domestic supply does not exist at scale.

South Korea's Samsung SDI and LG Chem had university R&D programs, government procurement guarantees for domestic cells in public fleets, concessional power, and parent conglomerates absorbing losses for a decade while the cell divisions climbed the yield curve. The subsidy was inside a system. India provided a subsidy without a system. The results correspond.

Electrode drying, dry room dehumidification at dewpoints below negative forty Celsius, formation cycling halls managing the thermal output of thousands of cells: these processes consume large amounts of electricity and need it to be stable and continuous. Indian industrial tariffs run ₹5 to ₹9 per unit depending on the state. Gujarat, Tamil Nadu, Telangana, and Karnataka have offered state-level supplements (land concessions, utility discounts, capital subsidies) that differ from each other in structure and duration. Site selection for a gigafactory is an optimization across power cost, port access for imported raw materials, state incentive quality, and how likely the state government is to follow through on its promises over a 10-year horizon. That last variable is not quantifiable and is arguably the most important.

Nobody in India is currently trained to run a cell manufacturing line. Slurry mixing, coating at 30-plus meters per minute, tab welding, electrolyte filling under vacuum, formation protocol design: specialized skills that Korea and Japan accumulated over decades. China built the workforce faster, partly by hiring Korean and Japanese engineers (which produced trade secret litigation). Indian manufacturers are starting from zero. Yield on a new cell line can start at 60%, meaning four of ten cells go to scrap. Mature plants run above 90%. That gap represents years and a lot of wasted material. The PLI incentive pays on cells sold. Scrapped cells generate cost with no offsetting revenue.

Ola's experience suggests the yield problem is not theoretical. Equipment calibration issues, material consistency problems, and cell quality concerns reported at the Pochampalli plant are symptoms of a workforce and process knowledge base that has not yet formed. Solving these problems is possible. It takes time. The PLI scheme's timeline pressure works against the patience required.

JSW Energy targeting 50 GWh by 2028-2030. Tata building 20 GWh in Sanand. Exide and Amara Raja proceeding with Chinese tech partners. Multiple other announcements adding up to roughly 178 GWh of capacity planned outside the PLI framework over the next five years.

Some of these announcements will not materialize. Capacity announcements in India carry a discount rate that varies by industry. In solar manufacturing, about half of announced capacity has historically been built. Battery cell manufacturing is harder than solar module assembly, so the discount rate may be steeper. Even if only a third of the 178 GWh materializes, that is 60 GWh, more than the PLI scheme's total target.

Whether it was designed to be a ₹18,100 crore signal rather than a ₹18,100 crore production incentive is not a question anyone in the Ministry of Heavy Industries would answer affirmatively. But the outcomes suggest it has functioned more as the former than the latter. The incentive money sits undisbursed. The signal has propagated.

The government is considering relaxing scheme rules and has indicated a review. The remaining 10 GWh of unallocated capacity is being redirected toward grid-scale stationary storage rather than EV applications. There is discussion of extending timelines and revising DVA escalation. The Net Zero Energy Transition Association has asked for a single-window clearance system for equipment imports and foreign supplier engagement.

The adjustments under consideration are procedural. The problem is structural. A component manufacturing incentive scheme, running in parallel, would change the economics for every gigafactory under construction, PLI or otherwise. The companies that can produce cathode material, process battery-grade graphite, synthesize electrolyte, and make separator film in India do not exist at the needed scale. Building them takes years of investment in a market where Chinese suppliers are entrenched, cheaper, and operate on accumulated process knowledge that cannot be replicated by spending money alone.

India's pharmaceutical industry built genuine process chemistry competence under early policy protection and became the world's largest generic drug manufacturer. India's solar panel manufacturing has received support across multiple policy cycles and still cannot match Chinese module costs. Whether the battery sector follows one trajectory or the other depends on variables the PLI scheme does not control: whether conglomerates like Tata and Reliance invest in the component base and not just in final cell assembly; whether Chinese technology transfer agreements produce lasting Indian capability or permanent dependency; whether the workforce bottleneck resolves through training programs that do not yet exist; and whether the 178 GWh of capacity announcements survive contact with the economics of competing against Chinese cells that cost less to produce than Indian cells will cost to produce for years after these factories open.

The cost gap is the central fact. If Indian cells cost 20-30% more than Chinese imports, the industry survives behind tariff walls and the downstream EV buyer absorbs the premium. The customs duty on imported cells was raised to 18.5% and may go higher. Tariff protection buys time. It does not close cost gaps. The PLI scheme was supposed to close the cost gap through incentives during the ramp-up period. For that to work, the factories need to be running. As of March 2026, the scheme's beneficiaries have produced 1.4 GWh out of 50, and the company that produced it has scaled back its plans by 75%.