drone pilot industryLiberalized Rules, New Incentives Announced

September 18, 2021by helo-10

India’s drone industry will benefit from the latest Production-Linked Incentive (PLI) Scheme, announced on September 15 for drones and drone components. Under the PLI Scheme, the government has liberalized the minimum value addition criteria to 40 percent of net sales for drones and drone components. The Scheme will also cover developers of drone-related IT products.

The announcement of the PLI Scheme comes on the heels of the Drone Rules, 2021 that was released on August 25, 2021, and relaxed approvals and other requirements for unmanned aircraft systems. The new rules basically make it easier to do business for civilian drone operators.

Together, the liberalized regulatory framework and manufacturing incentives scheme aim to promote the indigenization of drone technology in India, whose applications and use are expected to cater to a cross-section of industries.

India’s drone industry at an interesting juncture

Drones are used for aerial photography and cinematography, land surveys, monitoring infrastructure like roads and highways as well as by the construction industry, defense, mining, telecom, disaster management, oil and gas exploration and monitoring sites etc. More widespread consumer market applications will soon become less futuristic, keeping pace with progress in tech innovation and higher cost efficiencies, which has developed solutions like drone-facilitated last mile delivery and other support for the retail, healthcare, logistics sectors etc.

For this to be a reality in India, its drone industry capacity needs to scale up. That means increased local production serving demand, investments in R&D, and solutions for both broad use and hyperlocal requirements. Only then will the industry experience significant cost reductions. The PLI Scheme thus comes at a really opportune time for stakeholders in the drone industry as it intends to distribute incentives across the value chain.

This industry-ecosystem based approach spins off business opportunities for a wide range of companies upstream and downstream, from bigger firms in allied industries to high-tech startups as well as micro, small, and medium enterprises (MSMEs) – for component manufacturing; developing software applications, enterprise solutions, and counter drone technology; and the design and assembly of final products. The end outcome will be diversified product lines, finally reaching the level of consumer market appeal.

Market and industry growth projections

When the Drone Rules were announced this August, industry players projected that India’s drone market could grow to INR 500 billion (US$6.8 billion) in the next five years. This is because India’s regulatory norms were finally aligning with global trends, and opening prospects for commercial use and participation of foreign investors.

On its part, the Civil Aviation Ministry projects that India’s drone industry could see total turnover worth INR 120 billion to 150 billion (US$1.63 billion to US$2.04 billion) by 2026 assisted by the PLI Scheme, which has a budget allocation of INR 1.2 billion (US$16.32 million) spread over three years (information on how the scheme works is covered in a later section below). Drone makers in India currently have a turnover of about INR 800 million (US$10.88 million).

At a press briefing on Thursday, September 16, the Civil Aviation Minister Jyotiraditya Scindia said, “With Drone Policy (Rules) and Drone PLI scheme, we have an aim that drone manufacturing companies in India should reach a turnover of ₹900 crore [INR 9 billion (US$122.44 million)] in the coming three years.” This will be a cumulative result of the development of a “value chain in the drone industry”, covering “hardware (drone manufacturing), software, and service delivery.”

Prior to the Drone Rules 2021, the sector saw limited funding opportunities, with B2B startups attracting the bulk of any venture capital interest and overall limited scope for innovation in the industry. In fact, compared to investment in India’s drone startups (US$16.56 million), China’s drone startups had attracted 14x more investment between 2014-18, at about US$239 million.

Drone Rules, 2021: What are the key changes and market implications?

In March 2021, the Ministry of Civil Aviation (MoCA) published the UAS Rules, 2021. They received quite the backlash from academia, startups, end-users, and industry stakeholders for fostering a licenses-oriented regime and highly restrictive. The government responded to the feedback by repealing the UAS Rules, 2021 and replacing it with the liberalized Drone Rules, 2021.

In its formal notification of the new rules, the Civil Aviation Ministry noted that: “Unmanned Aircraft Systems (UAS), or drones, offer tremendous benefits to almost all sectors of the economy like agriculture, mining, infrastructure, surveillance, emergency response, transportation, geo-spatial mapping, defense, and law enforcement etc. 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. In view of its traditional strengths in innovation, information technology, frugal engineering and huge domestic demand, India has the potential to be global drone hub by 2030.”

Key regulatory relaxations for India’s drone industry

Rollback of a license regime

Under the Drone Rules, 2021, the total number of forms to be filled has come down to five from the previous 25 forms.

The approvals that are now abolished include: unique authorization number, unique prototype identification number, certificate of manufacturing and airworthiness, certificate of conformance, certificate of maintenance, import clearance, acceptance of existing drones, operator permit, authorization of R&D organization, student remote pilot license, remote pilot instructor authorization, and drone port authorization, among others.

Reduction in fees

Total fee payments to qualify as a drone operator has been reduced from 72 to four.

Delinking payments from drone size

Fee payments are now also delinked from the size of the drone. For example, it is reported that the remote pilot license fee, which was INR 3,000 for a large size drone, is reduced to INR 100 – this is also the fee for all drone categories.

Moreover, drones up to a weight of 500 kg has come under the ambit of the Drone Rules. Previously, the regulations covered drones up to 300 kg. This means drone taxis will become a possibility in India.

No security clearance required

Security clearance prior to issuing a drone license is now abandoned.

Foreign participation allowed

Foreign companies can also invest or own companies operating drones in India.

Import regulation

The Directorate General of Foreign Trade (DGFT) will continue to regulate import of drones but requirement of import clearance from the Directorate General of Civil Aviation (DGCA) is abolished.

Developing the Digital Sky platform

A single-window platform is being developed for the required clearances that will further streamline the process.

The government also intends to publish an interactive airspace map on this platform, showing yellow, green, and red zones, based on where drones can operate.

Zonal demarcation categories relaxed

The demarcation and mobility of drones in the yellow, green, and red zones have also been reformed. Previously, the yellow zone was a zone at a distance of 45 km from the airport perimeter; this is now reduced to a 12 km radius. Consequently, the green zone is an area beyond the 12 km radius of the airport perimeter.

PLI Scheme for drones and drone components

The PLI Scheme budget of INR 1.2 billion is nearly double the combined turnover of all domestic drone manufacturers in FY 2020-21. 

How the PLI Scheme works


The government has kept the eligibility norm for MSMEs and startups in terms of annual sales turnover at a nominal level – INR 20 million (for drones) and INR 5 million (for drone components).  This both widens and makes flexible the number of beneficiaries.

Eligibility norms for non-MSMEs, in terms of annual sales turnover, is INR 40 million (for drones) and INR 10 million (for drone components).


The incentive payable to a manufacturer of drones and drone components shall be simply one-fifth of the value addition. The below example was shared to illustrate the PLI calculation for a manufacturer.

Example: PLI Calculation for a Drone Manufacturer (Sample Year FY 2021-22)

Claim year

Sales – net of GST (INR crore)

Purchase – net of GST (INR crore)

Value addition (INR crore)


rate (%)

PLI due (INR crore)

FY 2021-22



100–60 = 40


40 x 20% = 8

The PLI for a manufacturer will be capped at 25 percent of the total annual outlay. In case a manufacturer fails to meet the threshold for the eligible value addition for a particular financial year, they will be allowed to claim the lost incentive in the subsequent year if they make up the shortfall in the subsequent year.

Key features
  • The incentive for a manufacturer of drones and drone components shall be as high as 20 percent of the value addition made by the firm.
  • 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 percent 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 percent of net sales for drones and drone components instead of 50 percent, another exceptional treatment given to the drone industry.

Estimated payout schedule

Estimated Payout Schedule of PLI for Drones and Drone Components

Claim year

Sales – net of GST (INR crore)

Purchase – net of GST (INR crore)

Eligible value addition (INR crore)

PLI rate for value addition (%)

Applicable PLI (INR crore)

Disbursement year

FY 2021-22






FY 2022-23

FY 2022-23






FY 2023-24

FY 2023-24






FY 2024-25








Which drone components are eligible PLI target beneficiaries?

The PLI Scheme will cover a wide variety of drone components, including the following:

  • 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 (radio frequency, 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
  • The list of eligible components may be expanded by the government from time to time, as drone technology evolves.
  • The government has agreed to widen the coverage of the incentive scheme to include developers of drone-related IT products.

Clear objectives behind flexible drone policy

The government estimates that the drones and drone components manufacturing industry will attract investments over INR 50 billion over the next three years. The annual sales turnover of the drone manufacturing industry is expected to grow multifold from INR 600 million in 2020-21 to over INR 9 billion in FY 2023-24. During this period, the drone manufacturing industry is expected to generate over 10,000 direct jobs.

The Production-Linked Incentives Scheme will also impact the breadth of the drone services industry (operations, logistics, data processing, traffic management, etc.). Cumulatively, the drone services industry is expected to grow to over INR 300 billion in the next three years and generate over 500,000 jobs.

Finally, besides the flexible criteria in identifying target beneficiaries, the PLI Scheme could be extended or redrafted after studying its impact in consultation with the industry.

About Us

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to [email protected] for more support on doing business in in India.

We also maintain offices or have alliance partners assisting foreign investors in Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Italy, Germany, and the United States, in addition to practices in Bangladesh and Russia.

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There is more to being a drone pilot than just buying a machine and flying in your backyard. It can be that simple, but most of us will need to understand some drone laws before we try to take to the sky.


    Objectively innovate empowered manufactured products whereas parallel platforms.