Affect of PLI Scheme on the UAV market in India

The Production Linked Incentive Scheme (PLI) has been launched for large scale electronics manufacturing keeping in mind the lack of level playing field, vis-a-vis competing nations, faced by the domestic electronics hardware manufacturing sectors. The PLI scheme will heal the infrastructure, domestic supply chain and logistics; high cost of finance, inadequate availability of quality power, limited design capabilities and R&D. The vision is to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by “encouraging and driving capabilities in the country for developing core components and creating an enabling environment for the industry to compete globally.

Production Linked Incentive Scheme (PLI) is boosting domestic manufacturing by driving large investments in specified electronic components, including Assembly, Testing, Marketing and Packaging (ATMP) units.   

The scheme extended an incentive of 4% to 6% on incremental sales(over base year) of goods manufactured in India and covered under target segments, to eligible companies, for a period of 5 years subsequent to the base year as defined. This scheme is implemented through a Nodal Agency which acts as a Project Management Agency (PMA) and is responsible for “providing secretarial, managerial and implementation support and carrying out other responsibilities as assigned by MeitY from time to time”.

Following the success of the First Round of Production Linked Incentive Scheme the second round will extend incentives of 5% to 3% on incremental sales over base year (i.e. 2019-2020) of goods manufactured in India and covered under the target segment to eligible companies for a period of four years.

The Government as approved PLI scheme for drones and drone components considering its traditional strengths in innovation, frugal engineering and its huge domestic demand, allocating 

• An amount of Rs 120 crore for drones and their components spread over 3 financial years – an amount double of all domestic manufacturers of drones’ combined turnover in the Financial year 2020-2021.
• For a manufacturer of drones and drone components the incentive shall be as high as 20% of the value addition made by her. 
• The calculation of the value addition will be done as the annual sales revenue from drones and their components minus their purchase costs.
• In an exceptional treatment given only to the drone industry, the government has agreed to keep the PLI rate constant at 20 per cent for all three years.
• The PLI’s scheme proposed tenure is three years starting in the Financial Year 2021-22. After studying its impact in consultation with the industry, PLI scheme will be extended or redrafted.
• In another exceptional treatment to the drone industry the government has agreed to fix the minimum value addition norm at 40 percent of net sales for drones and their components instead of 50 per cent.
• A wide variety of drone components are covered under the PLI scheme including Airframe, power systems, propulsion systems (engine and electric), launch and recovery systems, batteries and associated components inertial navigation system, inertial measurement unit, flight control module, ground control station as well as associated components; communication systems, camera, spraying systems, sensors and related payload, etc; ‘Detect and Avoid’ system, trackers, emergency recovery system, etc besides safety and security components.
• The central govt has agreed to widen the incentive scheme’s coverage to include developers of drone related IT products into the bargain.   

The tremendous boost in UAV manufacturing is indeed an outcome of the exceptional support shown by the Government while extending the PLI scheme for drone manufacturers. 

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