India’s drone production-linked incentive scheme details

Photo: Drone Swarm, for representational purposes only.

Taking another step towards realising our collective vision of an ‘Aatmanirbhar Bharat’, India today approved the Production-Linked Incentive (PLI) scheme for drones and drone components.

The PLI scheme comes as a follow-through of the liberalised Drone Rules, 2021 released by the Narendra Modi government on Aug. 25, 2021.  “The PLI scheme and new drone rules are intended to catalyse super-normal growth in the upcoming drone sector,” a Government of India statement said.

Drones offer tremendous benefits to almost all sectors of the economy. These include agriculture, mining, infrastructure, surveillance, emergency response, transportation, geo-spatial mapping, defence, and law enforcement, to name a few.  Drones can be significant creators of employment and economic growth due to their reach, versatility, and ease of use, especially in India’s remote and inaccessible areas.      

Given its traditional strengths in innovation, information technology, frugal engineering and its huge domestic demand, India has the potential of becoming a global drone hub by 2030.

Thanks to the new rules and the incentive scheme, the drones and drone components manufacturing industry may see an investment of over Rs 5,000 crore ($680 million) over the next three years.  The annual sales turnover of the drone manufacturing industry may grow from Rs 60 crore ($8-million) in 2020-21 fold to over Rs 900 crore ($122 million) in 2023-24. The drone manufacturing industry is expected to generate over 10,000 direct jobs over the next three years. 

The drone services industry (operations, logistics, data processing, and traffic management) is far bigger in scale.  It is expected to grow to over Rs 30,000 crore ($4 billion) in the next three years. The drone services industry is expected to generate over 500,000 jobs in three years.

Top features of the PLI scheme for drones:

  1. The total amount allocated for the PLI scheme for drones and drone components is Rs 120 crore ($16 million) spread over three financial years.  This amount is nearly double the combined turnover of all domestic drone manufacturers in financial year 2020-21. 
  2. The incentive for a manufacturer of drones and drone components shall be as high as 20 percent of the value addition made by her.
  3. The value addition shall be calculated as the annual sales revenue from drones and drone components (net of GST) minus the purchase cost (net of GST) of drone and drone components.
  4. The government has agreed to keep the PLI rate constant at 20 per cent for all three years, an exceptional treatment given only to the drone industry. In PLI schemes for other sectors, the PLI rate reduces every year.
  5. The proposed tenure of the PLI scheme is three years starting in 2021-22. The PLI scheme will be extended or redrafted after studying its impact in consultation with the industry.
  6. The government has agreed to fix the minimum value addition norm at 40 percent of net sales for drones and drone components instead of 50 percent, another exceptional treatment given to the drone industry. This will allow widening the number of beneficiaries.
  7. The PLI scheme covers a wide variety of drone components:
    1. Airframe, propulsion systems (engine and electric), power systems, batteries and associated components, launch and recovery systems;
    1. Inertial Measurement Unit, Inertial Navigation System, flight control module, ground control station and associated components;
    1. Communications systems (radio frequency, transponders, and satellite-based)
    1. Cameras, sensors, spraying systems and related payload;
    1. ‘Detect and Avoid’ system, emergency recovery system, trackers etc. and other components critical for safety and security.
  8. The list of eligible components may be expanded by the government from time to time, as the drone technology evolves.
  9. The government has agreed to widen the coverage of the incentive scheme to include developers of drone-related Information Technology products also.
  10. The Government has kept the eligibility norm for Micro, Small and Medium Enterprises (MSME) and start-ups in terms of annual sales turnover at a nominal level – ($271,882) Rs 2 crore (for drones) and ($67,960) Rs 50 lakhs (for drone components). This will allow widening the number of beneficiaries.
  11. Eligibility norm for non-MSME companies in terms of annual sales turnover has been kept at ($543,764) Rs 4 crore (for drones) and ($135,941) Rs 1 crore (for drone components).
  12. The incentive payable to a manufacturer of drones and drone components shall be simply one-fifth of her value addition as illustrated below for a sample year (say, 2021-22):
  • PLI for a manufacturer shall be capped at 25 percent of total annual outlay. This will allow widening the number of beneficiaries.
  • In case a manufacturer fails to meet the threshold for the eligible value addition for a particular financial year, she will be allowed to claim the lost incentive in the subsequent year if she makes up the shortfall in the subsequent year.
  • The estimated pay-out schedule is as shown below: 

Top features of Drones Rules, 2021 (Notified on Aug. 25, 2021):

  1. Based on a premise of trust and non-intrusive monitoring.
  2. Several permissions and approvals abolished.  Number of forms reduced from 25 to 5.  Types of fee reduced from 72 to 4. 
  3. Digital sky platform being developed as a user-friendly online single-window system. 
  4. Interactive drone airspace map with green, yellow and red zones shall be displayed by Sep. 24, 2021. 
  5. No permission required for operating drones in green zones. 
  6. Yellow zone, where ATC permission is required, has been reduced from 45 km to 12 km from the airport perimeter.
  7. No remote pilot licence required for micro drones (for non-commercial use) and all nano drones.
  8. No security clearance required before issuance of any registration or licence.
  9. Coverage of drones under drone rules, 2021 increased from 300 kg to 500 kg.  This will cover drone taxis also.
  10. No restriction on foreign ownership in Indian drone companies. 
  11. No requirement of import clearance from DGCA.
  12. Remote pilot licence to be issued by DGCA within 15 days of pilot receiving the remote pilot certificate from an authorised drone school.
  13. Maximum penalty for violations reduced to Rs 100,000.  Was several lakhs earlier.
  14. Drone corridors will be developed for cargo deliveries.
  15. Drone promotion council to be set up by government with participation from academia, start-ups and other stakeholders.

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