India allocates Rs 120 Cr to incentivise domestic drone manufacturing

The Indian government on Wednesday approved to allocate Rs 120 crore spread over the next three financial years towards production linked incentives (PLI) for manufacturing drones and its components in the country. 

Industry experts say the move could be a major shot in the arm for the local drone industry especially when seen in tandem with the highly liberal new drone rules. It could be a key driver for the Indian market where domestic drone companies have so far largely depended on importing a number of components from China to build their drones. 

The incentive for a manufacturer of drones and drone components shall be as high as 20% of the value addition made by them. 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.

The government has kept the PLI rate constant at 20% for all three years, which is unique to the drone industry. In PLI schemes for other sectors, the rate reduces every year.

The proposed tenure of the PLI scheme is three years starting in FY 2021-22 and will be extended or redrafted after studying its impact in consultation with the industry.

“The scheme will bring huge economic multipliers for India,where drones & drone components manufacturing sector is likely to see an investment of over INR 5000 cr and generate 10000 direct jobs over 3 years,” Civil Aviation Minister Jyotiraditya Scindia said in a statement. 

“The annual sales turnover of the drone manufacturing industry may grow from Rs 60 crore in 2020-21 fold to over Rs 900 crore in FY 2023-24,” the Civil Aviation Ministry said in a statement. 

The minimum value addition norm has been fixed at 40% of net sales for drones and drone components instead of 50%, another exceptional treatment given to the drone industry. Industry experts say this could allow more players to take part in the scheme. 

“The PLI scheme will encourage all drones and components manufacturers to come to India to leverage the low cost manufacturing environment and even the great talent pool we have here,” Ankit Mehta, co-founder of ideaForge, one of India’s biggest drone makers, said. 

MSMEs and startups with an annual sales turnover of Rs 2 crore (for drones) and Rs 50 lakhs (for drone components) are eligible for the scheme. For non-MSME companies, annual sales turnover has been kept at Rs 4 crore (for drones) and Rs 1 crore (for drone components).