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Explained: How govt's Rs 120-crore PLI scheme for drones can redefine sector

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The government plans to attract investments of Rs 5,000 crore in the next three years in the drone manufacturing industry, generating more than 10,000 jobs. It also expects the drone services industry to grow to over Rs 30,000 crore in the next three years, generating five lakh jobs.

Explained: How govt's Rs 120-crore PLI scheme for drones can redefine sector
The Centre has approved the production-linked incentive (PLI) scheme for drones and drone components, which is set to benefit a number of sectors like agriculture, mining, defence, law enforcement, geo-spatial mapping, and emergency response.
The scheme allocates Rs 120 crore for the drone industry spread over three financial years. The amount is nearly double the combined turnover of all domestic drone manufacturers in fiscal 2020-21, the government said in a press release.
Features of the scheme
Manufacturers will receive incentives of up to 20 percent on the value addition made by them, which will be calculated by subtracting the purchase cost of drone and drone components from annual sales revenue.
Unlike other sectors where the PLI rate reduces every year, the government will retain the PLI rate for drone manufacturing at 20 percent in all three years.
Eligibility
MSMEs and startups with annual sales turnover of Rs 2 crore (for drones) and Rs 50 lakh (for drone components) are eligible for the PLI scheme. Non-MSME firms with annual sales turnover of Rs 4 crore (for drones) and Rs 1 crore (for drone components) are also eligible to get incentives under the scheme.
The scheme will also cover developers of drone-related IT products.
Drone components
The scheme covers a plethora of drone components such as airframe, propulsion systems (engine and electric), power systems, batteries and associated components, launch and recovery systems. It will also include inertial measurement units and navigation systems, ground control stations, flight control modules, and associated components. Drone components used in communications systems such as radio frequency and transponders are also covered under the scheme.
In addition, it will also cover cameras, sensors, spraying systems and related payload along with 'detect and avoid’ systems, trackers, emergency recovery systems and other components used for safety and security.
Growth in numbers
In August, the aviation ministry enacted the liberalised Drone Rules, 2021 with the hope to catalyse growth in the drone sector. Together with the two schemes, the government plans to attract investments of Rs 5,000 crore in the next three years in the drone manufacturing industry, generating more than 10,000 jobs. It sees annual turnover growing from Rs 60 crore in 2020-21 to over Rs 900 crore in FY 2023-24.
It also expects the drone services industry to grow to over Rs 30,000 crore in the next three years, generating five lakh jobs. The drone services industry comprises operations, logistics, data processing, and traffic management services.
Industry reactions
Experts said the government is giving the deserved recognition to the drone industry.
“Currently, 90 per cent of drones in use in India are imported. There is no component ecosystem in the country and most of the major components are imported, especially from China. The government is giving the deserved recognition to the drone industry. It will now be upon local manufacturers to produce world-class products and scale up their research and development,” Ameet Nichani, owner of Ascom Systems, which designs and develops drones, told Business Standard.
“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 5,000 crore to have some serious cost reductions,” Chirag Sharma, Chief Executive Officer and Founder, Drone Destination Private Limited, told MoneyControl.
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