Why The Drone Import Ban Makes Sense

Import of foreign drones has been prohibited by the Directorate General of Foreign Trade (DGFT) with immediate effect. Exceptions have been provided for import of drones for R&D, defence and security purposes; but with due clearances.

The DGFT, an attached office of the Ministry of Commerce and Industry notified the Indian Trade Classification (Harmonised System), 2022 on 9 February 2022, effecting the prohibition of drones for import.

“Import of drones in Completely-Built-Up (CBU), Semi-knocked-down (SKD) or Completely-Knocked-down (CKD) form is prohibited, with exceptions provided for R&D, defence and security purposes,” the DGFT said.

Import of drones by government entities, educational institutions recognised by central or state government, the government recognised R&D entities and drone manufacturers for R&D purposes will be allowed in CBU, SKD or CKD form. This will be subject to import authorisation issued by DGFT in consultation with concerned line ministries.

Import of drones for defence and security purposes will be allowed in CBU, SKD or CKD form subject to import authorisation issued by DGFT in consultation with concerned line ministries.

However, import of drone components will not require any approvals.

Why the ban?

According to a statement from the Ministry of Civil Aviation, the import ban has been made in order to promote Made in India drones.

The government has taken a series of steps to boost domestic manufacturing of drones and drone components. This includes the liberalised Drone Rules, 2021 notified on 25 August 2021, and Rs 120 crore drone Production Linked Incentive (PLI) scheme.

Drones are Unmanned Aerial Vehicles (UAVs) or Remotely Piloted Aerial Systems (RPAS) that are controlled either by a pilot on the ground or with the help of technology.

Due to ease of operations, limited human intervention and accuracy of results generated, drones have widespread civilian applications. They are currently being used across the world for bringing transformational changes in almost all sectors of the economy like agriculture, mining, infrastructure, surveillance, emergency response, transportation, geo-spatial mapping, defence and law enforcement etc.

Drones are proving their value, gaining a strong hold in a variety of sectors, opening up new opportunities, and generating efficiencies across industries. They have emerged as a versatile tool capable of being applied to a wide range of contexts. For instance, industrial stakeholders are increasingly using drones to improve and optimise industrial processes as well as enhance operational efficiencies.

Additionally, drones have started replacing hazardous works such as mining and construction around the world.

Drone application in India

Drones have been around in India for a few years now. The ability of drones to reduce the cost of compliance and technology, while also enhancing the value of the information gathered through these systems have been the key drivers for increased adoption of drones in India.

But, it is the easing of regulations governing their usage which is driving a rapid rise in their use. The demand for drones in India has increased by almost 15 times over the last one and a half years. The value of the contracts too has also gone up 15 times over the same period.

The government is already leveraging the power of drone technology in various development programmes. For instance, the SVAMITVA (Survey of Villages and Mapping with Improvised Technology in Village Areas) Scheme launched on National Panchayati Raj Day, 24 April 2020 aimed to provide “Record of Rights” to every rural household owner. Aiming to demarcate inhabited (Abadi) land in rural areas through the latest surveying drone-technology, the scheme has enabled economic progress of rural India.

Of late, the Government of India and several state governments have been proactive in granting permits and allowing for pilots in the space of logistics.

The usage of UAVs is only going to increase as the technology itself gets more advanced as well as accessible to the average consumers. Soon, the by-lanes of Indian cities and towns would be abuzz with drones criss-crossing the skies, making food deliveries, doing surveillance or even spraying pesticides.

India’s Drone market

India is the fastest growing market for UAVs, according to the Indian Drone Market Report 2019-2024 by Drone Industry Insights. While, majority of these are for military purposes, commercial drones are showing healthy growth as well.

The drone market in India is predicted to mushroom to $885 million by 2021, according to a January 2020 PwC report, and is expected to reach $1,810 million by FY 2026, growing at a compound annual growth rate (CAGR) of 14.61 per cent. The global drone market is to scale over $43 billion in 2024 from $14 billion in 2018 at a CAGR of 20.5 per cent.

India accounts for 22.5 per cent of the world’s UAV import and tops the list of drone-importing nations. However, India has also developed its own UAVs through public sector units and private companies. The prominent ones include Rustom, Nishant, Panchi and Netra, while micro and mini UAVs are registered as Black Kite, Golden Hawk, Pushpak, Imperial Eagle and Sly Bird.

The drone ecosystem within India is currently evolving with a few players manufacturing and catering to commercial use. There are more than 150 drone start-ups mushrooming in India, indicating the wide scope of evolution of the drone and UAV ecosystem, going forward.

According to a report in the Business Standard, there are more than 100 drone manufacturers, with more than 200 drone service providers and over 1 lakh drone pilots in India.

Aarav Unmanned Systems, a Bengaluru-based company supplies drones to Tata Steel and national mapping agency Survey of India among others. Likewise, Skye Air Mobility is presently supplying drones as a service to Blue Dart, Dunzo and Flipkart as part of their trials with Telangana government to transport vaccines.

Hyderabad- based Grene Robotics, which has developed the country’s first autonomous drone defence dome, is ramping up its offering under its “Defence OS’ product line. It counts the aerospace and defence companies including Bharat Electronics among its customers.

In January, ideaForge received one of the largest small drone contracts worth $20 million for SWITCH 1.0 UAVs, which will be inducted in the Indian armed forces. These UAVs are capable of long duration operations, long endurance surveillance and security inspection.

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.

Drone Rules, 2021

The Ministry of Civil Aviation introduced a new set of rules to regulate the use of drones in India. The Drone Rules, 2021, notified on 25 August 2021, replaced the Unmanned Aircraft System (UAS) Rules, 2021, which only came into effect in March 2021.

The new rules do away with a host of approvals such as unique authorisation number, unique prototype identification number, certificate of manufacturing and airworthiness among others. The number of forms that needs to be filled has been slashed from 25 to five, and the number of fees to be paid before being able to operate drones has come down from 72 to just four.

Further, the need for security clearance prior to issuance of any registration or license has been abolished; foreign ownership in Indian drone companies has been allowed and the rules have been widened to include drone taxis also.

While actual job of building drones in India will require some extra time, the Rules have made the path easier. The new drone rules will boost innovation, help small and medium-sized enterprises and start-ups and create new growth opportunities, said the National Association of Software and Service Companies (Nasscom).

PLI scheme for Drones and Drone components

The Production-Linked Incentive (PLI) Scheme for drones and drone components has been notified on 30 September 2021 to promote the manufacturing of drones and drone components in India.

The proposed tenure of the scheme is three years starting in FY 2021-22 and it may be extended or redrafted after studying its impact in consultation with the industry.

Under the PLI scheme, incentives of Rs 120 crore will be given in the next three financial years. This amount is nearly double the combined turnover of all domestic drone manufacturers in FY 2020-21.

The incentive payable to an Indian manufacturer of drones and drone components shall be simply one-fifth of her value addition. 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.

In a landmark decision, the government has agreed to keep the PLI rate constant at 20 per cent 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.

Apart from drone and its components, the scope of the incentive scheme has been widened to include developers of drone-related IT products also. The list of eligible components may be expanded by the government from time to time, as the drone technology evolves.

The scheme also contains a number of features to widen the number of beneficiaries. This includes capping the incentive at 25 per cent of total annual outlay for a manufacturer and redefined eligibility norm for MSME and start-ups.

What’s the likely impact of these initiatives?

Thanks to the new rules and the incentive scheme, the drones and drone components manufacturing industry may see an investment of over Rs 5,000 crore over the next three years.

According to a government release, the annual sales turnover of the drone manufacturing industry may grow from Rs 60 crore in 2020-21 to over Rs 900 crore in FY 2023-24. The drone manufacturing industry is expected to generate over 10,000 direct jobs over the next three years.

The drone services industry (operations, mapping, surveillance, agri-spraying, logistics, data analytics, software development etc.) will grow to an even larger scale. It is expected to grow to over Rs 30,000 crore in next three years. The drone services industry is expected to generate over five lakh jobs in three years.

The PLI scheme and new drone rules are intended to catalyse super-normal growth in the upcoming drone sector.