Aim to start rolling out benefits of drone PLI scheme from next month: Govt sources

Representative image.

The government plans to start disbursing funds for its production-linked incentive (PLI) scheme for drones and drone components by November, multiple sources aware of the development told Moneycontrol.

“Another list of beneficiaries to be included under the PLI scheme for drones and drone components will be out by the end of October, following which the government will start rolling out funds,” a senior government official said.

The official added that a number of companies are still trying to prove their eligibility to be included under the PLI scheme but these discussions are likely to end soon.

Another government official said that the government does not want to delay the rollout of benefits under the PLI scheme to the industry in order to maintain the ongoing momentum.

“A number of companies want to be a part of the scheme from day 1, but have not been included as beneficiaries as they have missed eligibility criteria,” the second official said.

He added that drone companies can reapply under the PLI scheme next year and will be allowed to claim the lost incentive in the subsequent year if they make up the shortfall in 2022-23.

Despite the scheme being in place for over a year now, the drone industry has not yet seen any funds yet.

“Coming up with an industry-wise acceptable formula to determine value addition of startups was a back-and-forth process which caused delays in shortlisting beneficiaries under the scheme,” the first government official said.

The value addition is calculated as the annual sales revenue from drones and drone components (net of goods and services tax or GST) minus the purchase cost (net of GST).

The government had come out with its first provisional list of beneficiaries under the PLI scheme in April 2022 but revised the list in July to include 11 more companies while removing two companies.

Agnishwar Jayaprakash, CEO and founder of Garuda Aerospace, a Chennai-based drone manufacturer, said that he expects incentives from the PLI scheme to kick in by this quarter.

However, some industry players are still sceptical about benefits being sanctioned any time before next year.

Various industry participants said that a few drone manufacturers still trying to be included in the government’s PLI scheme may cause delays in the rollout.

“Since the drone industry in India is still at a nascent stage, we expect the benefits of the PLI scheme to begin rolling out by next financial year,” Rama Krishna, co-founder and CEO, Endure Air Systems, a Noida, Uttar Pradesh-based maker of drones, told Moneycontrol.

Krishna added that the manufacturing bottlenecks faced by startups are in the process of being addressed by the industry.

The government introduced the PLI scheme in September last year and chose 23 companies to be part of it. The scheme had a total incentive of Rs 120 crore spread over three financial years.

The target-driven scheme is meant to provide production incentives for GST-billed products. It works on the concept of domestic value addition achieved in the manufacture of a fully built drone.

The criteria included an annual sales turnover of at least Rs 2 crore for drone producers, and at least Rs 50 lakh for drone component manufacturers. Additionally, the companies should have a value addition of over 40 percent of sales turnover.

The government is also looking to substantially increase the outlay of the PLI scheme for the sector.

Amber Dubey, joint secretary with the ministry of civil aviation, had told Moneycontrol last month that the ministry is considering approaching the committee of secretaries to raise the quantum of PLI funds, given the growth in the industry’s turnover.

For fiscal 2023, the government has set a target of Rs 400 crore turnover, but looking at the growth trajectory it is now estimated to hit Rs 700 crore. The turnover is likely to touch the Rs 1,500 crore mark in fiscal 2024, according to estimates.

On the indigenisation front, while the scheme mandates over 40 percent value addition, the industry has achieved 66 percent in 2021-22. “This is a key area, we want to increase localisation of components and raise the domestic value-addition in the finished drone,” Dubey had told Moneycontrol.

At present, India has banned imports of drones manufactured overseas. However, it allows imports of critical parts. “It is expected to be a niche sector that is expected to attain domestic self-sufficiency in the shortest time,” Dubey had said.

Industry sources told Moneycontrol that ever since the government came out with the drone rules, 2021, in August last year and announced the PLI scheme for the industry, investments into the sector have grown manifold.

The Indian government’s backing of the sector has boosted the confidence of foreign investors and existing conglomerates in the sector, who have brought investments into the sector, they said