On September 15, 2021, the Government of India approved the Production Linked Incentive (PLI) scheme for drones and drone components. The scheme comes shortly after the announcement of India’s new liberalized Drone Rules 2021. A press release stated that the PLI scheme is part of the ‘Atmanirbhar Bharat’ vision and would aid in making India a global drone hub by 2030.
Catalyzing Growth of the Drone Sector
Over the past two years, drones have contributed greatly to various industries. From power line inspections to medicine delivery, drones have the potential to become a large part of the economy. The SVAMITVA scheme is a great example of how drones could end the rural property ownership crisis. The PLI scheme launched in 2020 has gained significant traction over the past year. The inclusion of drone and drone components in the scheme will only aid in the further development of the drone sector.
Due to this incentive scheme, the drones and drone components industry could attract an investment of INR 5,000 crore over the next three years. This in turn may grow the annual turnover of the drone manufacturing industry from INR 60 crore to INR 900 crore in a span of two years (2023-2024). Additionally, this would also create 10,000 direct jobs in the manufacturing industry alone.
A cascading benefit of the incentive scheme could be far more evident in the logistics and operations industry, which is growing at a faster pace. Drone delivery and UTM is beginning to take off. Multiple companies and projects have already begun testing drone deliveries. This sector is expected to grow over INR 30,000 crore in the next three years while generating over five lakh jobs.
Features of the PLI Scheme
Here are some of the most important features of the PLI scheme:
- The total amount allocated for the PLI scheme for drones and drone components is INR 120 crore spread over three financial years.
- The incentive for drone manufacturers will be 20% of the value addition made by the manufacturer. (Value Addition will be calculated by: Annual sales revenue minus purchase cost)
- Unlike PLI schemes for every year, for drones and drone components industry the PLI will remain constant at 20% for the next three years to promote rapid growth.
- The duration of the scheme is three fiscal years (2021-22 to 2023-24). This duration is subject to extension based on the performance of the drone sector during these three years.
- The minimum value addition norm will be fixed at 40% of net sales.
- Multiple drone components are covered in the PLI scheme, for example: airframe, propulsion systems, flight control module, communications systems, cameras, sensors, etc. More components may be added later. Read the entire list of components here.
- The incentive scheme’s coverage will be widened to include drone-related software products as well.
- The eligibility norm for MSMEs & startups is set low at INR 2 crore for drone manufacturers and INR 50 lakhs for drone components. (For non-MSME companies the eligibility is capped at INR 4 crore and 1 crore respectively)
- The payable incentive to a manufacturer will be one fifth of the value addition. PLI for manufacturers will be capped at 25%.
- In the case a manufacturer fails to meet the eligibility value addition for a particular financial year, they can claim the lost incentive in the subsequent year.
After three long years, India released a liberal and drone-friendly set of regulations. Over the course of 2018-2021, the restrictive policies stalled the drone industry. However, the new rules combined with the PLI scheme could make up for the lost industry potential. As of now, there are about 22 NPNT-compliant drones in India. This number could drastically increase over the course of 2021-2024. The lucrative scheme could also aid in attracting FDIs in the Indian drone sector, thereby significantly boosting the economy. Read the PLI press release here.