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Cheers For Drone Startups As India Allocates INR 120 Cr Under PLI Scheme

Cheers For Drone Startups As India Allocates INR 120 Cr Under PLI Scheme

From a corpus of INR 1.97 Lakh Cr for 13 Production Linked Incentive (PLI) Schemes, the government has now reserved INR 120 Cr for drones and drone components

A PLI scheme offers incentives on incremental sales for products manufactured in India, promoting domestic manufacturing over dependence on imports

The scheme offers a 20% incentive over the value addition to manufacturers of drones and related software

After the government approved 13 Production Linked Incentive (PLI) Schemes with a corpus of INR 1.97 Lakh Cr during the budget announced earlier this year, it has now reserved INR 120 Cr for drones and drone components. The decision comes at a time when the Indian drone startups aim to take wings and deliver essentials like drugs and vaccines in the farthest parts of the country.

Through a PLI scheme, the government provides incentives to companies for enhancing their domestic manufacturing. This helps reduce dependence on imports and helps improve the cost competitiveness of local goods. The PLI scheme offers incentives on incremental sales for products manufactured in India.

Key Points For Drones and Drone components:

  • The scheme offers a 20% incentive over the value addition to manufacturers of drones and related software
  • Here, value addition = net sales – purchase cost of drone components
  • Minimum value addition for the Drone PLI scheme is 40% of net sales, instead of the usual 50%

For example, if a manufacturer sells drones worth INR 100 Cr where the purchase of components cost INR 60 Cr, the profit (100 – 60) INR 40 Cr is the value addition. The incentive will be 20% of INR 40 Cr = INR 8 Cr.

The Ministry of Civil Aviation (MoCA) in a statement said:

  • Unlike the reduction formula every year, for drones and related components, the incentive rate is a constant 20% for all three years
  • The scheme is available for three financial years starting 2021-22
  • Manufacturers can also use the roll-over benefit in case they fail to meet the value addition requirement any year
  • The PLI Scheme will be further redrafted after studying its effects in consultation with the industry
  • The eligibility norm for MSME and startups in terms of annual sales turnover at a nominal level is INR 2 Cr (for drones) and INR 50 Lakhs (for drone components)
  • For non-MSMEs, the annual sales turnover is INR 4 Cr (for drones) and INR 1 Cr (for drone components)

The PLI scheme comes shortly after the government releases the liberalised Drone Rules, 2021 on 25 August 2021. “The scheme together with the new drone rules are intended to catalyse super-normal growth in the upcoming drone sector,” MoCA said in the statement.

The ministry further predicted that the drones and drone components manufacturing industry may see an investment of over INR 5,000 Cr over the next 3 years while the annual sales turnover of the drone manufacturing industry may grow from INR 60 Cr in FY 2020-21 to over INR 900 Cr in FY 2023-24. The drone manufacturing industry is expected to generate over 10,000 direct jobs over the next three years, it said.

According to the Inc42+ report titled Drone Technology India Opportunity report 2019, drone startups had a mere 2.26% share among the deeptech investments between 2014 and 2018.

However, as of 2019, drone startups raised total funding of $16.55 Mn, which is a significant rise. The number of Indian drone startups too crossed 50 as the market was introduced to some key players such as Cron Technology, Detect Systems, Drones Tech Lab etc. India’s drone startups also played a major role in the Covid-19 pandemic as they helped in medicine delivery, sanitisation etc.

Recently, MoCA has also granted a conditional exemption to the Indian Council of Medical Research (ICMR) to use drones up to 3,000 metres in Andaman & Nicobar Islands, Manipur, and Nagaland for vaccine delivery, while IIT Bombay has been permitted to fly drones within its premises for R&D and training purposes.