The Ministry of Civil Aviation (MoCA) recently announced far-reaching measures for the Indian drone industry under Production Linked Incentive (PLI) scheme for drones and drone components, which will run for three years starting in FY22.
The PLI scheme was preceded by the
liberalised ‘Drone Rules 2021,’ released by MoCA in August 2021 and are together expected to catalyse growth in the Indian drone industry. The latest incentives and reforms align with the government’s objective to establish India as a global drone hub by 2030, building on traditional strengths in Information Technology, frugal engineering and a large domestic market.
Unleashing Market Potential
While announcing the PLI scheme, Jyotiraditya M Scindia, Union Minister for Civil Aviation, said INR 120 crore of incentives will be available to the industry over the next three years. The industry is likely to grow over INR 900 crore in FY24 due to the measures taken. About INR 5,000 crore will be invested in drone manufacturing in the next three years, which will bring a turnover of INR 900 crore, and 10,000 job opportunities, Scindia said. The FY21 turnover was INR 60 crore.
India’s drone industry has immense potential due to the tremendous benefits it can offer to almost all sectors of the economy. Potential applications range from agriculture, mining, infrastructure, surveillance, emergency response, transportation, geo-spatial mapping, defence, and law enforcement, to name just a few.
According to MoCA, the drone services industry, comprised of operations, logistics, data processing, traffic management etc., could be far bigger in scale. However, its estimates that the drone services industry could grow to over INR 30,000 crore and potentially generate over five lakh jobs in the next three years can only be termed optimistic. There is no denying, however, that the drone industry can emerge as a significant creator of employment and economic growth in India.
Incentivising Growth
MoCA has allocated INR 120 crore under the PLI scheme for drones and drone components, nearly double the combined turnover of all domestic drone manufacturers in FY 2020-21. In the schemes for other sectors, the PLI rate reduces every year; however, an exception has been made for the drone industry, wherein the 20% PLI rate will remain constant for all three years. In addition, the government has also decided to incentivise manufacturers of drones and drone components up to 20% of the value addition made by them.
The minimum value addition norm for drones and drone components has been set at 40% of net sales instead of 50% as in other sectors. The value addition shall be calculated as the annual sales revenue from drones and drone components (net of GST) and deducting the purchase cost (net of GST) of drone and drone components. The PLI scheme for the drone industry could be further extended or redrafted in consultation with the industry after studying its impact.
Widening The Net
Medium and Small Scale Enterprises (MSME) will be key beneficiaries of the scheme, and the eligibility norm has been set at an annual sales turnover of INR2 crore for drones and INR 50 lakh for drone components. For non-MSME’s to be eligible, their annual sales turnover has been set at INR4 crore for drones and INR1 crore for drone components.
Under the scheme, the incentive payable has been set at one-fifth of their total value addition in a year, capped at 25% of the total annual outlay. Manufacturers will be allowed to claim the lost incentive in the subsequent year if they fail to meet the threshold for eligible value addition for a particular financial year, provided the shortfall is made up in the subsequent year. The incentive scheme has also been widened to include developers of drone-related IT products, and the government could also expand the list of eligible components in the future to cater for evolving drone technologies.