– Penned by Bhavya Kundu
This edition of Macroscan focuses on the UAV segment in India, brought to the forefront through the Drone Rules 2021. Hope you find it insightful!
Note: As far as this piece goes, UAVs and drones are considered to be synonyms.
What are the new rules?
The Drone Rules 2021 [1] attempt to liberalise the UAV ecosystem in the country by superseding the restrictive UAS Rules 2021. The government wants India to be a drone hub by 2030 and is trying to woo private sector players into the sector. Some important highlights of these rules include [2]
Reduction of the number of forms from 25 to 5; cutting down on types of applicable fee from 72 to 4
The license fee was reduced from Rs 3,000 to Rs 100 across all categories, and the validity increased to ten years
-Seamless integration via the digital sky platform,significantly reducing registration steps
-Self-generated permissions and minimal human interface
-Easy process to deregister from the platform or transfer to other parties
-Import clearance from DGCA abolished, import regulated by DGFT
-Provision for development of drone corridors
Experts suggest this policy is at par with policies in the developed nations.
Why are the new rules important?
On June 28, 2021, India woke up to a new kind of reality. The Air Force Station in
Jammu was attacked by terrorists with drones, injuring two personnel. Drones have been used to drop off narcotics, arms, and ammo across the border with Pakistan, and the trend is picking up.
It seems that the GoI has taken note of developments in the UAV segment around the world. UAVs have gained potency; some of the immediate applications of these drones are found on the battlefield (hinting at the Nagorno-Karabakh conflict). Keeping these advancements in mind, India is woefully unprepared. These rules signal a change in mentality as the GoI wants to rope in the private sector to help set up a UAV ecosystem.
According to SIPRI, India is the third-largest importer of military-grade drones [3]. It is akin to outsourcing national security to other parties, which seems to be a fundamentally unacceptable proposition today.
But it is not just the defence applications of UAVs that are an attractive concept.
Figure 1: Various categories of drones specified under the Drone Rules 2021
The non-defence applications
For exciting Indian projects involving drones, make sure to check out the link, page 16 from the EY report and page 14 from the PWC report. [4]. We shall summarise some applications here.
Agriculture: Perhaps the industry that stands to benefit the most. Drones can be used to monitor crops, spray optimal amounts of fertiliser rapidly, conduct crop life stage assessments.
Disaster relief: Drones enable rapid action in disaster-affected areas. Coordinated and timely steps can save valuable lives.
Construction: Heavy payload models can provide rapid fulfilment of material, speeding up construction. They are also being used to monitor progress.
Law enforcement: India is chronically short of police personnel. Drones can be a force multiplier by enabling real-time updates and monitoring.
Delivery systems: This includes food, grocery, healthcare or other deliveries in a B2C setting. Since India has an abysmal healthcare system, drones are especially valuable in any future-ready supply chain.
Structural preservation: India has creaking infrastructure. Drones can use infrared sensors to find out structural issues in buildings and increase lifespan.
Oil and gas: Drones can be used to identify oil formations, and therefore increase odds of making financially viable investments. Furthermore, they can be used to detect leaks in oil pipelines quickly.
Air taxis: This is an application in the works. Air taxis would be heavy payload drones that can be inserted into designated stations. Such taxis can reduce traffic congestion on roads.
Market size and growth prospects
Various studies estimate the Indian market very differently. Here is a table to visualise results from different studies.
Figure 2: Market size estimates (studies listed in the drive link [4])
* Extrapolation at 18% CAGR (specified in the interview)
** Assumed Indian market to be ~25% of US market
*** Extrapolation at 28% CAGR
Companies have been attracting the eyes of investors recently. Several private equity players are active in picking up winners around the world. [6]
Domestic players earn revenues around ₹60 Cr. annually.
What are the upcoming applications in the segment?
AI and ML technologies will significantly enhance drone capabilities as UAVs can understand their environment better. Smart UAVs can communicate with others in the vicinity (M2M communication) and thus facilitate data analysis. With the onset of 5G and the integration of cloud technology, this sector is poised for a massive uptake.
What are the issues with the current drone ecosystem in India?
India lacks a manufacturing ecosystem for drones. Most of them are merely assembled in India. Worryingly, around 90% of drone components are sourced from abroad, especially China – and localisation is a long road ahead. Unless this is addressed, the policy alone cannot do much good. [7]
The GoI launched a PLI scheme and allocated ₹120 Cr. to be spread over three years. Manufacturers would get an incentive of up to 20% of the contribution to value addition by these manufacturers.
Figure 3: UAV value chain as visualised by McKinsey & Co.
The government wants to attract investments to the tune of ₹5,000 Cr. These investments would directly create more than 10,000 jobs as per the Ministry of Civil Aviation and boost the revenues of domestic players to around ₹900 Cr. annually.
Conclusion
The UAV segment in India is a nascent industry but shows potential. Defense accounts for approximately 60% of current usage. India being an agricultural country, can harness the powers of drones in its fields. UAVs can plug gaps in the fragmented supply chains of the country while creating hundreds of skilled jobs. However, most of the Indian industry is at the mercy of foreign players, and steps taken by the GoI are ones in the right direction.
Sources
[1]-https://www.civilaviation.gov.in/sites/default/files/Draft_Drones_Rules_14_Jul_2021.pdf
[2]-https://pib.gov.in/PressReleseDetailm.aspx?PRID=1749154
[4]-https://drive.google.com/drive/folders/14-phM8B2G1g8E2nw7GVyWoP6E2wL6HP4?usp=sharing
[6]-https://www.cbinsights.com/research/most-well-funded-private-drone-companies/
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