On September 15, 2021, the Ministry of Civil Aviation has issued approval of the Production-Linked Incentive (PLI) scheme for drones and drone components. The PLI scheme and new drone rules are intended to catalyse super-normal growth in the upcoming drone sector.
- Total amount allocated for the PLI scheme for drones and drone components is INR 120 crore spread over three financial years. This amount is nearly double the combined turnover of all domestic drone manufacturers in FY 2020-21.
- Incentive for a manufacturer of drones and drone components shall be as high as 20% of the value addition made by her.
- Value addition shall 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.
- Government has agreed to keep the PLI rate constant at 20% for all three years, an exceptional treatment given only to the drone industry. In PLI schemes for other sectors, the PLI rate reduces every year.
- Proposed tenure of the PLI scheme is three years starting in FY 2021-22. The PLI scheme will be extended or redrafted after studying its impact in consultation with the industry.
- Government has agreed to fix the minimum value addition norm at 40% of net sales for drones and drone components instead of 50%, another exceptional treatment given to the drone industry. This will allow widening the number of beneficiaries.
- List of eligible components may be expanded by the Government from time to time, as the drone technology evolves.
- Government has agreed to widen the coverage of the incentive scheme to include developers of drone-related IT products also.
- Government has kept the eligibility norm for MSME and start-ups in terms of annual sales turnover at a nominal level – INR 2 cr. (for drones) and INR 50 lakhs (for drone components). This will allow widening the number of beneficiaries.
- Eligibility norm for non-MSME companies in terms of annual sales turnover has been kept at INR 4 crore (for drones) and INR 1 crore (for drone components).
- Incentive payable to a manufacturer of drones and drone components shall be simply one-fifth of her value addition.