Budget 2023: Drone industry wants tax relief, service-linked incentives, increase in PLI outlay 

The 2022 budget was a reason to rejoice for the drone industry. Union Finance Minister Nirmala Sitharaman launched Drone Shakti, a mission to make India a drone hub by 2030, in her budget speech.

She also said Kisan (farmer) drones will be used to drive a technology wave in agriculture.

A month after that, Prime Minister Narendra Modi inuaugurated Bharat Drone Mahotsav (India drone festival), where he said the unmanned aerial vehicles will enable technology-driven government and last-mile delivery of services to Indians.

Since then, nearly a year has passed and the drone industry has been riding high, facilitated by open policies, and interest from market participants in the form of investments and so on.

Now, the industry is seeking another push from the government in the budget for FY 24 in the form of measures it claims will take it to the next level of growth.

Tax relief 

Prateek Srivastava, founder and managing director of IPO-bound DroneAcharya Aerial Innovations, wants the Union government to increase eligibility criteria for a rule that enables startups to enjoy 100 percent tax deduction for three consecutive years.

These can be any three years in the first 10 years of its incorporation.

"Startups do not earn any profit in the first 10 years. In line with industry bodies' demand, this eligibility should be extended to 15 years and for a block of five years, instead of three years," Srivastava told Moneycontrol.

Srivastava added that the Goods and Services Tax (GST) on startups should be reduced.

"Currently, the GST with the full input tax credit is 18 percent for all software products produced and sold in India. This rate should be reduced to support indigenous creators of software IP (intellectual property) in the country," Srivastava said.

Service-linked incentive 

The drone industry's budget wishlist includes a service-linked incentive.

For every indigenous drone manufacturer, India has about 450 drone service providers and the country’s goal is to become a global hub of drone technology, noted Agnishwar Jayaprakash, founder and CEO of Garuda Aerospace.

Moneycontrol has reported that the government was exploring plans to introduce a service-linked incentive for the drone sector.

Minister of Civil Aviation Jyotiraditya Scindia has projected the drone-as-a-service (DRaaS) industry to become a Rs. 30,000 crore sector in a period of three years.

Ankit Kumar, Chief Executive Officer of Skye Air Mobility, urged the government to provide incentives for Software as a Service (SaaS) players in the drone space.

"We expect that the upcoming budget in 2023 will focus on providing incentives to SaaS startups who have been building Indian technology for the global markets. Incentives for SaaS players in the drone space will boost the industry multifold and help towards faster scalability," Kumar said.

In July, Moneycontrol reported that the New Delhi-based drone startup had decided to concentrate more on developing its software platform in a bid to fend off rising competition from behemoths such as Reliance Industries and the Adani Group.

Increase in subsidies and PLI outlay 

DroneAcharya's Srivastava also asked the government to provide incentives for employee training and development of skills.

The demand was also voiced by Jayaprakash of Garuda Aerospace.

"The budget should include more subsidies for drone pilots for their training and skilling programmes along with government collaboration and involvement," Jayaprakash said.

Kumar of Skye Air also expects an allocation in the budget that will enable farmers to get fresh produce from farm-to-market in quick time.

Experts also called for a Kisan drone subsidy.

For promoting the use of Kisan drones, the government has been providing 50 percent or a maximum of Rs 5 lakh subsidy to scheduled castes and tribes, women and small farmers of northeastern states to buy drones.

In a meeting earlier, industry representatives had pointed out to Minister of Civil Aviation Scindia that the rollout procedure for subsidies was not clear at the State level.

The drone industry is also calling for an increase in the outlay for the Production-Linked Incentives (PLI) scheme for makers of drones and drone components.

Recently the government notified the operational guidelines for the scheme. Currently, the scheme has an outlay of Rs 120 crore.