Drone industry may soon see more incentives as government works on PLI hike

Representative image.

The government is working to increase the quantum of the production-linked incentive (PLI) scheme for drone and drone components, multiple sources in the know have told Moneycontrol. 

"The quantum of the current PLI scheme is enough to boost the industry for the next few years, however, by the third year, a higher quantum will be needed as the industry's revenues will grow multifold by then," said Smit Shah, President of the Drone Federation of India.

He added that based on the ongoing discussions between the industry and the government, the quantum of the PLI scheme for drones is likely to be increased in the the next three to four months.

"The drone industry in India has grown exponentially in the last eight months and the government is looking to increase allocation under the PLI scheme as the allocation of Rs 120 crore will not be enough for the next three years," a source said.

A senior government official told Moneycontrol that discussions to increase the quantum of the PLI scheme for the drone industry are still in the preliminary stage, and a decision on the same will be taken after reviewing the growth of the drone market in India.

"The government is in discussion to increase the quantum of the PLI scheme by around threefold," the government official said.

Another official aware of the discussions said that the turnover of the drone industry in India is expected to nearly double every year for the next five years, As a result, the industry would require a higher quantum under the PLI scheme, the official said.

"The overall turnover of the industry will double compared to 2020-21, and cross Rs 150 crore in 2022-23. The government has used the industry's turnover in 2020-21 as the base for the PLI scheme, which has grown multifold since then," the official said.

The government in 2021 introduced the PLI scheme for drones and drone components, with a total incentive of Rs 120 crore spread over three financial years.

The Rs 120 crore set aside by the government last year was nearly double the combined turnover of all domestic drone manufacturers in FY2020-21.

The government had set the PLI rate at 20 percent of value addition, one of the highest among other (???) PLI schemes.

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, investment flow into the sector has grown multi-fold.

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.

"Drone manufacturers in India that have good products have been offering services in the sector for a while and have their own intellectual property (IP) have seen increased demand for their products," Vipul Singh, Co-Founder and Chief Executive Officer of Aarav Unmanned Systems (AUS), said.

He added that due to the growth his company has witnessed over the year, AUS has upgraded its plans to raise funds through equity infusion – from around $10 million to $25-20 million now.

Aarav Unmanned Systems is a nine-year-old drone company that works on the government's land digitisation scheme, SVAMITVA, across several states such as Uttar Pradesh, Haryana, and Andhra Pradesh.