Govt announces Rs120-cr PLI scheme for drones and drone components

Apprising the media about the important features of the PLI scheme at a press conference in New Delhi, union minister of civil aviation, Jyotiraditya M Scindia, said that under the PLI scheme, incentives of Rs120 crore will be given in the next 3 years. This amount is 1.5 times the combined size of the manufacturing drone sector.

The government expects that over a period of three years, an estimated investment worth Rs5,000 crore for manufacturing drones in the country, which in turn will bring a turnover of Rs900 crore, and create 10,000 job opportunities.

He further saod that the objective is to establish India as a global drone hub by 2030 and that the ministry of civil aviation is committed to facilitate industry, service delivery and consumers in achieving the target.  

The total amount allocated for the PLI scheme for drones and drone components is Rs120 crore spread over three financial years.  This amount is nearly double the combined turnover of all domestic drone manufacturers in FY2020-21. 

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

The value addition will 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 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 gets reduced every year.

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

The government has agreed to fix the minimum value addition norm at 40 per cent of net sales for drones and drone components instead of 50 per cent, another exceptional treatment given to the drone industry.  This will allow widening the number of beneficiaries.

The PLI scheme covers a wide variety of drone components, including airframe, propulsion systems (engine and electric), power systems, batteries and associated components, launch and recovery systems, inertial measurement unit, inertial navigation system, flight control module, ground control station and associated components, communications systems (radio frequency, transponders, satellite-based etc), cameras, sensors, spraying systems and related payload etc, ‘detect and avoid’ system, emergency recovery system, trackers etc and other components critical for safety and security.

The government may expand the list of eligible components from time to time, as the drone technology evolves.

The government has agreed to widen the coverage of the incentive scheme to include developers of drone-related IT products also.

The government has kept the eligibility norm for MSME and startups in terms of annual sales turnover at a nominal level - Rs2 crore (for drones) and Rs50 lakhs (for drone components). This will allow widening the number of beneficiaries.

Eligibility norm for non-MSME companies in terms of annual sales turnover has been kept at Rs4 crore (for drones) and Rs1 crore (for drone components).

The incentive payable to a manufacturer of drones and drone components will be simply one-fifth of the value addition as illustrated below for a sample year (say, FY 2021-22).

PLI for a manufacturer will be capped at 25 per cent 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, he/she will be allowed to claim the lost incentive in the subsequent year if she makes up the shortfall in the subsequent year.

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.

The PLI scheme comes as a follow-through of the liberalised Drone Rules, 2021 released by the central government on 25 August 2021.  The PLI scheme and new drone rules are intended to catalyse super-normal growth in the upcoming drone sector. 

The drone services industry (operations, logistics, data processing, traffic management etc) is far bigger in scale.  It is expected to grow to over Rs30,000 crore in the next three years. The drone services industry is expected to generate over five lakh jobs in three years.