India’s drone industry, a burgeoning sector with immense potential, has garnered significant attention over the last few years due to its wide range of civilian and national security applications.
As the industry looks to the future, there is hope for continued support and growth, beginning with extending the ₹120 crore Production-Linked Incentive (PLI) Scheme, launched in FY22 and concluded in FY24.
Smit Shah, President of the Drone Federation of India, emphasised the impact of the PLI scheme on the ecosystem, stating, “There are about 400-plus startups that have come in the ecosystem. The extension of the PLI scheme will ensure that more companies can participate and can essentially take benefit of the scheme. The drone PLI scheme will directly help us to increase indigenisation and help in the entire fight against ‘some of our friendly neighbours.’”
To transform India into a global drone hub by 2030, industry leaders argue that substantial investments in research and development are crucial. Financial aid, such as an extended PLI scheme, would be beneficial, but it may not suffice alone. The sector needs to grow rapidly to enhance the use of drone technology in national security and other areas.
Vipul Joshi, CFO of ideaForge, highlighted the need for government support in R&D investments, saying, “The kind of size of commitments the companies are trying to make and the increase in developmental opportunities happening, it will be great to get support from the government’s side where upfront investments in R&D could be invested or supported by the government. It will be great if the government makes this technology a part of the overall governance and security framework.”
Higher drone adoption, whether for defence or civilian use, will lead to cost-effectiveness and necessitate a robust local component manufacturing ecosystem and supply chain to increase localisation without compromising quality. The industry believes a dedicated R&D Fund is essential for achieving this goal.
Smit Shah stressed the importance of developing a domestic component and tier-II supplier ecosystem, noting, “There has to be a major focus on developing our own domestic component and tier-II supplier ecosystem, which is why we require an R&D fund. Some of the R&D funds that are being earmarked should have a special focus on drone components.”
Additionally, the industry seeks a simplified tax structure to provide stability and predictability for the numerous startups within the sector. Shah added, “The drone industry being a very nascent industry, there is a need for a lot of handholding in terms of HSN codes, import duties, and GST rates, so that whatever is written in the policy is clearly understood through clarifications and capacity-building workshops to the industry.”
In summary, the Indian drone industry is optimistic about its future, contingent on extending the PLI Scheme, establishing a research and development fund for drone components, and simplifying the tax regime. If these three key elements are addressed in Budget 2024, the industry is poised to soar, facing fewer obstacles and paving the way for India to become a global drone hub by 2030.
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