The Indian government on Wednesday approved to allocate Rs 120 crore spread throughout the following three financial years towards creation linked incentives (PLI) for manufacturing drones and its parts in the country.

Industry specialists say the move could be a major shot in the arm for the local drone industry especially when found in tandem with the profoundly liberal new drone rules. It very well may be a vital driver for the Indian market where homegrown drone companies have so far largely relied upon importing various parts from China to construct their drones.

The incentive for a manufacturer of drones and drone parts shall be as high as 20% of the value addition made by them. The value addition shall be calculated as the annual sales income from drones and drone parts (net of GST) minus the purchase cost (net of GST) of drone and drone parts.

The public authority has kept the PLI rate constant at 20% for all three years, which is novel to the drone industry. In PLI plans for different sectors, the rate decreases each year.

The proposed residency of the PLI plot is three years starting in FY 2021-22 and will be broadened or redrafted after studying its impact in consultation with the industry.

“The plan will bring enormous economic multipliers for India,where drones and drone parts manufacturing sector is probably going to see an investment of over INR 5000 cr and generate 10000 direct positions more than 3 years,” Civil Aviation Minister Jyotiraditya Scindia said in a statement.

“The annual sales turnover of the drone manufacturing industry may develop from Rs 60 crore in 2020-21 overlay to over Rs 900 crore in FY 2023-24,” the Civil Aviation Ministry said in a statement.

The minimum value addition norm has been fixed at 40% of net sales for drones and drone parts instead of half, another exceptional treatment given to the drone industry. Industry specialists say this could allow more players to take part in the plan.

“The PLI plan will encourage all drones and parts manufacturers to come to India to leverage the minimal expense manufacturing climate and even the great talent pool we have here,” Ankit Mehta, prime supporter of ideaForge, one of India’s greatest drone makers, said.

MSMEs and startups with an annual sales turnover of Rs 2 crore (for drones) and Rs 50 lakhs (for drone parts) are qualified for the plan. For non-MSME companies, annual sales turnover has been kept at Rs 4 crore (for drones) and Rs 1 crore (for drone parts).