Union Cabinet boosts drone manufacturing with clearance of PLI scheme
For drones and drone components, the Union Cabinet has sanctioned a production-linked incentive (PLI) scheme which seeks to provide incentives for manufacturers. The proposed tenure of the PLI scheme is three years starting in FY 2021-22. The incentives will be as high as 20 percent of the value addition made.
For three years, the government has also decided to keep the PLI rate constant at 20 percent. As per the government, the PLI scheme for drones will be extended or redrafted after studying its impact in consultation with the industry.
The industry players have welcomed the decision of the government and they are optimistic about this step.
“PLI will encourage indigenisation and the Drone Policy will galvanise usage of drones. Now the costs can only come down with scale-up. The industry needs to attain a size of about Rs 5000 crore to have some serious cost reductions,” said Chirag Sharma, Chief Executive Officer and Founder, Drone Destination Private Limited.
Ankit Kumar, Founder, Alternative Global India EV & Drone, a management consulting firm, felt that the PLI scheme for drones and drone components “will be a game changer.”
“It is very positive to see policymakers pay elaborate attention to the market situation, and level of development and competition, while drafting these policies,” said Paras Jain, Founder and Chief Executive Officer, Indo Wings.
The government has also decided to expand the coverage of the incentive scheme to include developers of drone-related IT products.
The government’s statement added that 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.
In a move which is meant to enhance the number of beneficiaries, the government has agreed to fix the minimum value addition norms at 40 percent of net sales for drones and drone components instead of 50 percent.
A wide range of drone components are covered in the PLI scheme which includes airframes, propulsion systems (engine and electric), power systems, batteries and associated components, launch and recovery systems, Inertial Measurement Units, Inertial Navigation Systems, flight control modules and ground control stations and associated components. In addition, communications systems (radio frequency, transponders, satellite-based etc.), cameras, sensors, spraying systems and related payload apart from 'Detect and Avoid’ systems, emergency recovery systems, trackers among others and other components critical for safety and security are also a part of the PLI scheme.
In order to encourage the MSMEs and start-ups to manufacture drones and related parts, the annual sales turnover have been fixed at a nominal level of Rs 2 crore (for drones) and Rs 50 lakh (for drone components). The eligibility norm for non-MSME companies in terms of annual sales turnover has been kept at Rs 4 crore (for drones) and Rs 1 crore (for drone components).
"The PLI scheme will put Rs 120 crore in the hands of domestic manufacturers over the next three years. This along with the liberalised Drone Rules, 2021, released on August 25 this year will put India on the path of becoming a global drone hub by 2030," Amber Dubey, Joint Secretary, Ministry of Civil Aviation told MoneyControl.
“The incentive when calculated together with components and IT support will have a cascading benefit effect on the end product,” said Sharma of Drone Destination. He added that the government’s estimates for the Rs 1500-crore drone industry’s revenues over 3 years works out to about 8 per cent incentive “which is pretty encouraging.”
“More than the incentive it is the importance and urgency that the government is demonstrating to indigenise this industry as soon as possible,” said Sharma.
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