Pari-passu: how a scheme releases the government share

Updated 2026-10-18

Pari-passu means in step. When a scheme says it pays 30% of capital expenditure on a pari-passu basis, the government neither pays first nor pays at the end: the nodal agency releases its pro rata share after the applicant has mobilised the corresponding share into a no-lien account, and that account may be used only for eligible capital expenditure on the approved project.

Pari-passu

In an Indian incentive scheme, a pari-passu payment is the government share released pro rata only after the applicant has mobilised its own corresponding share into a no-lien account, which may be spent only on eligible capital expenditure for the approved project.

What the phrase means

Pari-passu is Latin for “with equal step”. In a government incentive scheme it describes the timing of the money rather than its amount. A scheme that pays 30% of capital expenditure on a pari-passu basis is not promising a 30% grant up front, and it is not promising a 30% refund once the plant runs. It is promising that each time the applicant puts in its share, the nodal agency releases the proportionate government share alongside it.

The Semicon 2.0 guidelines define it as the pro rata payment released by the nodal agency after the corresponding share has been mobilised by the applicant or project company, together with its other sources of funds, into a no-lien account.

The no-lien account

The no-lien account is where both shares are deposited. Under the Semicon 2.0 guidelines the project company opens one with a scheduled commercial bank in India, and the nodal agency signs an agreement with the company and that bank covering how the fiscal support is used; where a state government also contributes, it is a party to the same agreement. The deposits in the account may be used only for eligible capital expenditure on the approved project, and the government share is released into it after the applicant share arrives. The condition applies to every instalment, starting with the first.

Why the sequence matters for planning

Two consequences follow for anyone modelling a project against a scheme like this.

The first is that the applicant funds every stage before the government matches it, so the scheme reduces the total cost of the project without reducing the working capital needed to start each stage of it. A promoter still has to arrange the full tranche and wait for the match.

The second is that the paperwork governs the timing. The money moves against verified expenditure: under the Semicon 2.0 guidelines the capital expenditure incurred on a project is verified by the nodal agency or a project management consultant it appoints, and a release carries the other conditions set in the approval letter and the fiscal support agreement. A firm reading a scheme’s headline percentage as cash in hand at the start of construction has read the wrong thing.

Both are separate from what the PLI schemes do. A production-linked incentive pays against sales after they happen; a pari-passu capital subsidy pays against investment as it happens.

Questions this raises

What does pari-passu mean in a government scheme?

Pari-passu is Latin for "with equal step", and in an incentive scheme it describes the timing of the money rather than its amount. The Semicon 2.0 guidelines define it as the pro rata payment released by the nodal agency after the corresponding share has been mobilised by the applicant or project company, together with its other sources of funds, into a no-lien account. A scheme on this basis neither pays a grant up front nor refunds the spend at the end: each time the applicant puts its share in, the agency releases the proportionate government share alongside it.

What is a no-lien account?

The account both shares are deposited into. Under the Semicon 2.0 guidelines the project company opens one with a scheduled commercial bank in India, and the nodal agency signs an agreement with the company and that bank covering how the fiscal support is used; where a state government also contributes, it is a party to the same agreement. Deposits in the account may be used only for eligible capital expenditure on the approved project, and the government share arrives in it after the applicant share does.

Does the government pay before or after the applicant spends?

After. The applicant funds each stage before the government matches it, and the condition applies to every instalment, starting with the first. A scheme of this kind therefore reduces the total cost of a project without reducing the working capital needed to start each stage of it, so a promoter still has to arrange the full tranche and wait for the match.

Is a pari-passu capital subsidy the same as a PLI incentive?

No, and the difference is what the money is paid against. A production-linked incentive pays against sales after they happen. A pari-passu capital subsidy pays against investment as it happens, and a release is made against expenditure the nodal agency or a project management consultant it appoints has verified, under the conditions set in the approval letter and the fiscal support agreement.