Overview

Drones offer tremendous benefits to almost all sectors of the economy.  These include agriculture, mining, infrastructure, surveillance, emergency response, transportation, geo-spatial mapping, defence, and law enforcement to name a few.  Drones can be significant creators of employment and economic growth due to their reach, versatility, and ease of use, especially in India’s remote and inaccessible areas.     

The PLI (Production Linked Incentive) scheme for Drone and Drone Components (PLI Scheme) comes as a follow-through of the  release of Geospatial Data Guidelines issued on 15 February 2021 followed by liberalised Drone Rules, 2021 released by the Central Government on 25 August 2021 and further releasing of India’s airspace map for drone operations on 24 September 2021.  The PLI scheme and new drone rules are intended to catalyse super-normal growth in the upcoming drone sector.

PLI Scheme for Automobile Industry and Drone Industry is part of the overall announcement of PLI Schemes for 13 sectors made earlier during the Union Budget 2021-22, with an outlay of ₹ 1.97 lakh crore which is approved by Union Cabinet of India on 15 September 2021. The PLI scheme is notified vide notification no. S.O. 4044(E) dated 30 September 2021 with financial outlay of INR 120 crore. The detailed guidelines shall be notified separately.

We have covered for PLI Scheme on the following key aspects;

1. Eligibility Criteria
2. Eligible Products
3. Incentives Computation
4. Other Aspects
5. Way forward

1. Eligibility criteria

The objective of this scheme is to incentivise:

• Manufacturing of drones and
• Drone components in India (Only if the drone components for which scheme is being obtained would be solely in the manufacturing of a drone.)
• Developers of software for drones and drone components

so as to make them self-sustaining and globally competitive. The application under the scheme can be made by any company registered in India, engaged in the manufacturing of drones and drone components including developer of software.

The minimum annual sales turnover for different category of manufacturers of drone and drone components for claiming PLI incentive are as follows:

*For all the new investors, the annual sales turnover from sale of drones and drone components has to be above the threshold mentioned.

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2. Eligible Products

Following products would be eligible under PLI Scheme:

• Drones

• Developers of software for drones and drone components

• Components as enlisted below:

1. Airframe, propulsion systems (engine and electric), power systems, batteries and associated components, launch and recovery systems;
2. Inertial Measurement Unit, Inertial Navigation System, flight control module, ground control station and associated components;
3. Communications systems (radio frequency, transponders, satellite-based etc.);
4. Cameras, sensors, spraying systems and related payload etc.;
5. ‘Detect and Avoid’ system, emergency recovery system, trackers etc. and other components critical for safety and security.

The list of eligible drones and drone components may be modified by the Central Government from time to time.

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3. Incentive computation

The scheme would be for three years from the FY 2021-2022 till FY 2023-24 and the PLI rate prescribed under the scheme is 20% of eligible value addition in India for the entire tenure of the scheme. Eligible value addition in India in a financial year shall be eligible sales turnover minus the eligible purchase cost.

The PLI would be provided only if the manufacturer achieves an eligible value addition in India of at least 40% of the eligible sales turnover for the financial year as given under illustration below (Figures in INR Crores):

In case a manufacturer fails to meet the threshold for the eligible value addition in India for a particular financial year, they shall not receive any PLI for the said financial year. However, they would be eligible to receive the said PLI in the subsequent year subject to making up the said shortfall in rupee terms in the subsequent year.

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4. Other aspects

• Total PLI per manufacturer is capped at INR 30 crores which is 25% of the total financial outlay of INR 120 crores.

• Multiple claims by a manufacturer under different PLI schemes of Government of India may lead to disqualification of such manufacturer, in addition to legal action as applicable under the law.

• The application has to submitted through an online portal. However, in case the portal is not available, it would have to be submitted in physical form.

• The PLI Scheme would have provision for an audit to be done by external auditor (Chartered Accountant or Cost Accountant) appointed by Ministry of Civil Aviation.

• The disbursement claim will be filed annually by the applicant within six months from the end of the financial year to which the claim pertains.

5. Way forward

• PMA needs to be appointed by Ministry of Civil Aviation.

• The detailed operational guidelines to be issued separately.

• The Application Form along with details of all necessary supporting documents, to be submitted at the time of application, will be notified separately in due course of time.

• Last date for filing the applications to be notified.

Thanks to the new rules, the drone PLI scheme and the freely accessible drone airspace maps, the drones and drone components manufacturing industry may see an investment of over INR 5,000 crore over the next three years.  The annual sales turnover of the drone manufacturing industry may grow from INR 60 crore in 2020-21-fold to over INR 900 crore in FY 2023-24.  The drone manufacturing industry is expected to generate over 10,000 direct jobs over the next three years.

The drone services industry (operations, mapping, surveillance, agri-spraying, logistics, data analytics, software development etc.) will grow to an even larger scale.  It is expected to grow to over INR 30,000 crore in next three years. The drone services industry is expected to generate over five lakh jobs in three years.

Given its traditional strengths in innovation, information technology, frugal engineering and its huge domestic demand, India has the potential of becoming a global drone hub by 2030.

Being the scheme is limited in terms of fund involving bidding process, time line and eligibility conditions, its utmost important to have adequate project management and support to deliberate and accordingly prepare the application and apply to obtain the approval.

About the Author:

Vineet has over 16 years of consulting experience in leadership role in Indirect tax including GST (around 13 years in Big 4) and working with leading players in diverse industry sectors including automotive sector. He has conducted sessions on various tax and regulatory topics (including GST) at Client’s place, Business Parks, and other forums (ASCI, FTAPCCI, JICA, KOTRA, EPC, ICAI, ICFAI, JITO, RGA and others).

https://www.linkedin.com/in/d-vineet-suman-a5a28729

You can reach out on 91-99529 26239 or email [email protected] as Darda Advisors LLP having experience of assisting multiple clients in PLI schemes of other sectors as well.

www.dardaadvisors.com

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