Unmanned aerial systems (UAS) or drones are the future of flight. With advancements in electronics and cameras and their integration with AI and machine learning systems, drones have come a long way. From reconnaissance in the Vietnam war to mapping rural villages in India for a record of land rights, UASs have played increasing roles in post-disaster operations, atmospheric sensing, public security, infrastructure management and logistics.
With increased commercialisation and new applications for UASs, the enterprise drone market in India has grown steadily. It is estimated it will account for 41 per cent of the global drone market by 2027. That global market itself will be worth an estimated USD54 billion by 2025. With the increased demand for quick delivery, the increased efficiency of hybrid commercial drones and the development of progressive regulatory frameworks, the logistics drone segment is expected to account for 36 per cent of the global drone market by 2030. This year has already seen Walmart use drones to deliver to its 36 stores in the US. Technit Space and Aero Works has launched a medicine drone delivery service in Kolkata, with plans to expand in the FMGC and e-commerce sectors.
The drone industry in India, although nascent, has seen dramatic growth in recent years and is expected to expand rapidly. Such advance is driven by increasing demand across sectors such as agriculture, infrastructure, public safety and defence.
The UAS market in India was estimated at USD2.7 billion in 2022 and is expected to grow to USD23 billion by 2030. The defence drone segment accounted for the largest share of this market in 2022 at USD1.28 billion, with uses in surveillance, terrain mapping, and counter-defence. The government estimates that the UAS industry in India will have a turnover of INR120 billion to INR150 billion (USD1.47 billion to USD1.83 billion) by 2026. With the use of drones spreading beyond the defence field, the industry has been encouraged by the government through the introduction of market friendly laws, regulations, policies and initiatives. The government plans to make India a global hub for drone manufacturing by 2030.
To improve the ease of doing business and liberalise the drone market, the government introduced the Drones Rules, 2021 (rules), replacing the Unmanned Aircraft System Rules, 2021. The rules introduced sweeping changes, including eliminating restrictions on foreign owned and controlled companies manufacturing and operating drones and simplifying drone registration and certification. In promoting the Make in India initiative, the government has largely prohibited the import of completely built up and semi- and completely knocked down drones, although components can still be imported. It also announced an INR1.2 billion production-linked incentive scheme for the manufacture of drones and drone components for three years starting from the FY 2021-22.
The government intends to encourage the use of drones to improve agriculture by giving grants of up to the lesser of INR400,000 or 40 per cent of the cost of drones. This increases to the lesser of INR500,000 or 50 per cent of the cost for scheduled caste, scheduled tribe, small and marginal, women and north-eastern farmers. The administration has introduced the Pradhan Mantri Kaushal Vikas Yojana 4.0 youth training and employment programme in the 2023-24 budget, which will provide industry-focused drone, robotics, and mechatronics vocational training courses.
The rapidly growing domestic drone market, the rising global demand for drones, and a favourable regulatory framework, make India attractive for investors. A highly skilled engineering workforce, combined with its low cost of production, position the country as an ideal destination for those investing in drone R&D and large-scale manufacturing. Progressive regulatory frameworks in the sector have led to an increase in the number of manufacturers, the volume of foreign investment and the number of drone use cases.
In 2022, the Japan-based USD170 million Drone Fund, one of the world’s largest dedicated VCs promoting UASs, announced plans to invest up to US40 million in drone companies in India and to partner with the Aerodyne India group. Swiggy, India’s second-largest food delivery platform, will tender contracts for grocery delivery trials using drones.
Anand Srivastava is managing partner and Abhishek Sharma and Namita Das are partners at Link Legal.
The contents are for the purpose of information only and are not in the nature of legal opinion or advice. Link Legal does not warrant their accuracy and completeness and readers should seek appropriate professional advice.
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