Centre Plans INR 2,000 Crore Incentive Scheme to Boost Domestic Drone Manufacturing The new incentive programme is seen as an attempt to not only strengthen national security but also foster a robust domestic industry capable of serving both civilian and defence sectors.

The Indian government is preparing to roll out a INR 2,000 crore ($234 million) incentive programme aimed at strengthening the country's domestic drone manufacturing ecosystem, according to a report by Reuters. The proposed scheme, which is expected to be implemented over three years, will target the production of drones, their components, software, counter-drone systems, and allied services.

The initiative is being developed under the Ministry of Civil Aviation and is part of a broader effort to reduce reliance on imported technologies and address growing regional security concerns, particularly in light of Pakistan's expanding drone programme backed by China and Turkey.

According to the Reuters report, the scheme will include provisions to localise the production of at least 40 per cent of key drone components in India by the end of FY 2027-28. In addition, manufacturers who procure critical parts from within the country will reportedly be eligible for extra incentives, a move aimed at deepening the domestic value chain.

The Small Industries Development Bank of India (SIDBI) is also expected to play a supporting role by offering low-cost loans to drone technology firms for working capital and research and development purposes, the report said.

This would mark the second major government-led incentive for India's drone sector. In 2021, the Centre launched a production-linked incentive (PLI) scheme with a total allocation of INR 120 crore. That programme ended last year. Since then, there has been growing anticipation of a follow-up initiative, especially after the then civil aviation secretary Vumlunmang Vualnam indicated in October 2023 that a new PLI scheme was under consideration.

While the earlier PLI scheme helped initiate a fledgling drone ecosystem, officials have reportedly argued that the scale was insufficient to compete with foreign counterparts or to serve India's defence needs independently. The recent uptick in cross-border tensions has accelerated the urgency around launching a more expansive and targeted support mechanism.

India's drone manufacturing currently depends heavily on components from countries such as China and Israel. The new incentive programme is seen as an attempt to not only strengthen national security but also foster a robust domestic industry capable of serving both civilian and defence sectors.