Production Linked Incentive (PLI) Scheme for Drones and Drone Components

The Government of India has released a Production Linked Incentive (PLI) scheme for manufacturers of drones in India. PLI scheme for drones and drone components seeks to promote the growth of the drone manufacturing sector in India, in conjunction with the Drone Rules 2021. PLI scheme provides incentives that will see the growth of more indigenous drone and drone component manufacturers, promote foreign investment in the sector and generate employment. This current article outlines the specifics of the Production Linked Incentive (PLI) scheme for drones and drone components.

Click here to know more about Drone Registration in India

PLI Scheme for Drones and drone components

To make India a global hub for the research and development, testing, manufacturing, and operation of drones under the Atmanirbhar Bharat Abhiyan, the Government of India plans to create a growth-oriented regulatory framework for drones. Accordingly, it released the liberalized Drone Rules, 2021 on 25th August 2021.

The objective of the PLI Scheme for Drones

The objective of this PLI Scheme for Drones is to incentivize the manufacturing of drones and drone components in India to make them self-sustaining and globally competitive.

Features of the PLI scheme for Drones

• The total amount allocated for the PLI scheme for drones and drone components is Rs.120 crore spread over three financial years.  This amount is nearly double the combined turnover of all domestic drone manufacturers in FY 2020-21.
• The incentive for a manufacturer of drones and drone components shall be as high as 20% of the value addition made by her.
• The 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.
• The 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.
• The proposed tenure of the PLI scheme is three years starting in FY 2021-22.  .
• The Government has agreed to fix the minimum value addition norm at 40% of net salesfor drones and drone components instead of 50%, another exceptional treatment given to the drone industry.  This will allow widening the number of beneficiaries.
• The PLI scheme covers a wide variety of drone components:
• The Government has agreed to widen the coverage of the incentive scheme to include developers of drone-related IT products also.

Eligibility Criteria

All manufacturers of the following drone components shall be eligible for the Production Linked Incentive (PLI) scheme for drones and drone components.

• Airframe, propulsion systems (engine and electric), power systems, batteries, and associated components, launch and recovery systems
• Inertial Measurement Unit, Inertial Navigation System, flight control module, ground control station, and associated components
• Communications systems (radiofrequency, transponders, satellite-based, etc.)
• Cameras, sensors, spraying systems, and related payload, etc.
• ‘Detect and Avoid’ system, emergency recovery system, trackers, etc. and other components critical for safety and security
• Manufacturing shall have the same meaning as defined in the Central Goods and Services Tax Act, 2017. Component manufacturers shall have to establish that the drone components for which PLI is being claimed are used solely in the manufacturing of a drone

Minimum Annual Sales Turnover for Claiming PLI

All manufacturers of drones and drone components whose annual sales turnover is above the following threshold shall be eligible for claiming PLI

Note: For new investors, the annual sales turnover from the sale of drones and drone components should be above the threshold mentioned here

Tenure of the Scheme

The tenure of this scheme shall be three years starting from the financial year 2021-22. The PLI for a particular financial year will be claimed and disbursed in the subsequent financial year.

An approved applicant shall be eligible for benefits for three consecutive financial years but not beyond the financial year 2023-24

Computation of the Incentive

• Eligible sales turnover is defined as the total sales turnover achieved in a financial year (net of GST) from the sale of drones and drone components as stated in such manufacturer’s GST returns.
• Eligible purchase cost is defined as the total cost (net of GST) incurred in a financial year for the purchase of drones and drone components as stated in such manufacturer’s GST returns.
• Eligible value addition in India in a financial year shall be eligible sales turnover minus the eligible purchase cost as defined above.
• For ample clarity, developers of software for drones and drone components are also eligible for the PLI, subject to the eligibility norms and guidelines of this scheme.
• The PLI rate applicable to the eligible value addition in India shall be 20% for the entire tenure of the scheme.

Financial Outlay

The total financial outlay of the PLI scheme for drones and drone components is Rs.120 crore (Rupees one hundred and twenty crores only). In case the calculated incentive payout under this scheme exceeds the budget, it will be reduced on a pro-rata basis.

The administrative expenses for the scheme will be absorbed within the overall limit of INR 120 crore.

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

Application Procedure for PLI scheme for Drones and Drone Components

• An application under the scheme can be made by any company registered in India, engaged in the manufacturing of drones and drone components.
• All applications will be submitted through an online portal maintained by the PMA. In case the portal is not available, applications may be submitted in physical form to the PMA.
• Claim for disbursement of incentive shall be filed on an annual basis by the applicant within six months from the end of the financial year to which the claim pertains.