Drone & UAV Companies in India: DGCA Rules, PLI Scheme & FDI

India's Drone Sector: Rapid Growth With Strong Government Backing

India's drone sector has expanded rapidly since the liberalised Drone Rules, 2021 took effect, driven by adoption across defence, agriculture, logistics, infrastructure, and surveillance applications — and the government has reinforced that growth with a PLI scheme, a prohibition on finished-drone imports, and a proposed manufacturing incentive package of approximately INR 1,800 crore reported in March 2026.

The government's approach to drones is distinctly dual-track: aggressively promote domestic manufacturing while restricting imports of finished drones. For foreign companies, this creates a clear strategic imperative — the path to the Indian drone market runs through manufacturing in India, not exporting to India. Understanding the DGCA regulatory framework, PLI incentive structure, FDI policy, and import restrictions is essential for any foreign drone company evaluating this market.

DGCA Regulatory Framework: Current Rules and the 2025 Bill

The current legal framework governing drones in India is the Drone Rules, 2021 (amended in 2022), administered by the Directorate General of Civil Aviation (DGCA). However, a comprehensive legislative overhaul is underway.

Drone Rules, 2021: The Current Framework

The existing rules classify drones into five categories based on maximum all-up weight:

Draft Civil Drone (Promotion and Regulation) Bill, 2025

In September 2025, the Ministry of Civil Aviation released the draft Civil Drone Bill for public consultation; it will replace the existing rules once enacted. Key changes include:

• Stricter type certification: Every drone model must receive a DGCA-issued type certificate before it can be manufactured, sold, or operated in India — with fewer exemptions than under current rules
• Criminalised violations: Several violations have been upgraded from civil penalties to criminal offences. Police can investigate, detain drones, and make arrests without a magistrate's order
• Enhanced surveillance powers: DGCA gains expanded authority to inspect manufacturing facilities, audit maintenance operations, and revoke certifications
• Mandatory insurance: Commercial drone operators will require third-party liability insurance

The Bill has drawn mixed reactions — aeromodelling and hobbyist groups raised concerns about over-regulation of recreational use, while industry bodies have generally supported the framework for providing regulatory certainty to commercial operators and manufacturers.

Type Certification: The Mandatory Gateway

Type certification is the single most important regulatory requirement for drone manufacturers in India. Under the Drone Rules, 2021 (rules 6 and 13), no drone — other than a nano drone or a model remotely piloted aircraft — may be operated in India unless it conforms to a Type Certificate (TC) issued by DGCA. Strictly, the current rules do not require a TC merely to manufacture or import a drone, but because customers cannot legally operate an uncertified model, the TC is commercially indispensable — and the draft Civil Drone Bill, 2025 proposes to extend the certification requirement to manufacture and sale itself.

Certification Process

1. Application submission: Apply through the DigitalSky Platform (digitalsky.dgca.gov.in) with complete technical documentation — design drawings, materials specifications, flight control software documentation, and safety feature descriptions
2. Testing agency assignment: The Quality Council of India (QCI) or its accredited agencies test the prototype drone against DGCA-approved parameters
3. Performance and safety testing: Testing covers flight characteristics, payload capacity, range limitations, emergency response systems, fail-safe mechanisms, and operational performance under various conditions
4. Report submission: Testing agencies submit their evaluation reports within 60 days
5. DGCA review and issuance: DGCA reviews the test reports and issues the Type Certificate within 15 days of satisfactory evaluation

Total Timeline: 75 Days on Paper, Longer in Practice

The official process from application to TC issuance takes 75 days — 60 days for the test report plus 15 days for DGCA issuance — though delays in testing agency scheduling and documentation rework commonly stretch this to 3-4 months. For foreign manufacturers, the type certificate is the absolute prerequisite for market entry.

BIS Standards for Components

Drone components — particularly lithium-ion battery packs — must comply with Bureau of Indian Standards (BIS) certification. All lithium battery packs must be tested and certified according to IS 16046 / IEC 62133 standards before they can be imported or used in domestically manufactured drones.

FDI Policy for the Drone Sector

India's FDI policy for drones operates at the intersection of civil aviation and defence regulation:

Civil/Commercial Drones

100% FDI is permitted under the automatic route for civil and commercial drone manufacturing. No prior government approval is required for the investment. The foreign company must incorporate an Indian entity, comply with FEMA regulations including FC-GPR filing, and obtain the necessary DGCA certifications.

Defence/Military Drones

Drone manufacturing for defence applications falls under the defence manufacturing FDI policy: up to 74% under the automatic route, with 100% available through the government approval route where modern technology access is demonstrated. An Industrial Licence from DPIIT is also required for defence drone manufacturing.

GST Reforms

Under GST 2.0 reforms effective September 22, 2025, the GST rate on unmanned aircraft was unified at 5%, replacing the earlier structure of 5%, 18% or 28% depending on drone type, significantly lowering costs for drone manufacturers and making India-manufactured drones more price-competitive against imports.

PLI Scheme and Government Incentives

The government has progressively escalated its financial support for domestic drone manufacturing:

Original PLI Scheme (2021)

The initial Production-Linked Incentive scheme, launched in September 2021 with an outlay of INR 120 crore over three years, provided incentives based on domestic value addition. The incentive was calculated as a percentage of incremental sales of drones and drone components manufactured in India.

Proposed INR 1,800 Crore Incentive Package (March 2026)

In March 2026, the government unveiled plans for a drone manufacturing incentive package of approximately INR 1,800 crore — called Mission Drone Shakti — a 15x escalation from the original PLI scheme. The proposed package aims to transition the drone industry from assembly to deep-tech manufacturing: support for new manufacturing units and R&D infrastructure, incentives linked to manufacturing turnover, and a focus on component manufacturing to reduce import dependence on motors, ESCs, flight controllers and propellers. The final contours await formal notification.

Drone Shakti Initiative

The Drone Shakti programme, first announced in the Union Budget 2022-23, is aimed at expanding drone adoption across agriculture, healthcare delivery, disaster management, and logistics — and the proposed 2026 manufacturing incentive carries the Mission Drone Shakti name forward. This initiative creates guaranteed demand for drone manufacturers — a critical factor for foreign companies calculating their India market entry ROI.

Import Policy: Components Free, Finished Drones Restricted

India's drone import policy is deliberately asymmetric — designed to promote domestic manufacturing:

Finished Drones

Import of drones in CBU, SKD or CKD form (HS Code 8806) is Prohibited under DGFT Notification No. 54/2015-20 (dated February 9, 2022). The only exceptions — imports by government entities and recognised institutions for R&D, and imports for defence and security purposes — require an import authorisation from DGFT. There is no general licence-plus-duty route: finished foreign drones cannot be imported for commercial use at all.

Drone Components

Import of drone components is classified as Free under DGFT Notification No. 54/2015-20 (dated February 9, 2022). This is the central pillar of India's drone manufacturing strategy: restrict finished goods, allow components. Key duty considerations:

• Microprocessors and core electronics: May be exempt from Basic Customs Duty (BCD) under international agreements
• Other electronic components: Typically attract BCD of 7.5-15%
• Lithium-ion batteries: Require BIS certification (IS 16046 / IEC 62133) before import
• Structural materials: Carbon fibre, aluminium alloys subject to standard industrial tariffs

For foreign drone companies, this policy creates a clear playbook: establish manufacturing in India, import components duty-free or at low rates, and produce finished drones domestically. Companies need an Import Export Code (IEC) for component imports — a straightforward INR 500 registration.

Key Players and Competitive Landscape

Foreign companies entering the Indian drone market will compete and potentially partner with an established domestic ecosystem. Understanding the competitive landscape is essential for positioning:

Leading Indian Drone Companies

Foreign Company Engagement Models

Foreign drone companies typically enter India through one of three models:

• Wholly-owned subsidiary: Full control over manufacturing, IP, and operations. Best for companies with proprietary technology and long-term India commitment. Requires WOS incorporation with 100% FDI under the automatic route
• Joint venture with Indian partner: Share risk, gain market access, and leverage the Indian partner's distribution and government relationships. Particularly relevant for defence drone manufacturing where Indian management control requirements apply
• Technology licensing: License proprietary drone designs, flight control software, or component technology to Indian manufacturers. Lower capital commitment but reduced control over quality and brand

Setting Up a Drone Company in India: Step-by-Step

Phase 1: Entity Incorporation (2-4 weeks)

1. Incorporate a private limited company using SPICe+ form
2. Bring in FDI under the automatic route — file FC-GPR within 30 days of share allotment
3. Appoint a resident director (mandatory for all Indian companies with foreign shareholders)
4. Obtain PAN, TAN, and GST registration

Phase 2: Regulatory Approvals (2-4 months)

1. Register on the DigitalSky Platform for DGCA compliance
2. Submit drone models for type certification through QCI-accredited testing agencies
3. Apply for IEC if importing components
4. Obtain BIS certification for lithium battery components
5. If manufacturing for defence applications, apply for Industrial Licence from DPIIT

Phase 3: Manufacturing Setup (3-6 months)

1. Establish manufacturing facility — consider locations near existing aerospace clusters (Bengaluru, Hyderabad, Chennai, Pune)
2. Apply for PLI scheme benefits through the Ministry of Civil Aviation portal
3. Set up quality management systems compliant with DGCA requirements
4. Complete the DGCA type certification process for each drone model

Phase 4: Market Entry (Ongoing)

1. Register as a vendor with government procurement portals (GeM — Government e-Marketplace) for defence, agriculture, and infrastructure contracts
2. Build distribution partnerships with Indian drone service providers
3. Explore defence procurement opportunities through the appropriate FDI route

Airspace Permissions and Operational Compliance

Beyond manufacturing, foreign companies offering drone-as-a-service or operating drones commercially in India must understand the airspace permission framework:

Airspace Zones

Indian airspace for drone operations is divided into three colour-coded zones accessible through the DigitalSky Platform:

• Green Zone: Up to 400 feet AGL (above ground level) in uncontrolled airspace — no permission required for micro and small drones
• Yellow Zone: Controlled airspace requiring prior permission from the concerned Air Traffic Control authority — includes areas within 12 km of an operational airport's perimeter (reduced from 45 km by the Drone Rules, 2021)
• Red Zone: No-fly zones including military installations, international borders (25 km buffer), Vijay Chowk in Delhi, and strategic locations — drone flights strictly prohibited except with specific defence ministry authorisation

BVLOS Operations

Beyond Visual Line of Sight (BVLOS) operations — critical for logistics delivery, pipeline inspection, and agricultural spraying at scale — require specific DGCA approval. India has been progressively liberalising BVLOS permissions, with several corridor-based approvals granted for medical delivery and agricultural spraying in 2025. Foreign companies developing BVLOS-capable platforms should engage with DGCA early to understand the experimental permission process.

Tax Framework for Drone Manufacturers

Corporate Tax

New manufacturing companies that were incorporated after October 2019 and commenced manufacturing operations on or before 31 March 2024 could opt for a concessional corporate tax rate of 15% (effective 17.16% including surcharge and cess) under section 115BAB of the Income-tax Act, 1961 — this window has since closed to new entrants, though companies that qualified continue on the 15% rate from 1 April 2026 under section 201 (Table, Sl. No. 1) read with section 205(2) of the Income-tax Act, 2025. Combined with the reduced 5% GST on drones and PLI incentives, the effective tax burden for drone manufacturers in India is among the lowest globally.

Transfer Pricing

Foreign-invested drone companies must maintain arm's-length pricing for inter-company component supply, technology licensing, and management fees. Transfer pricing documentation is critical given that many drone companies source key components from their overseas parent or affiliates.

R&D Deductions

Expenditure on in-house R&D at an approved facility qualifies for a 100% deduction under section 45(2) of the Income-tax Act, 2025 (section 35(2AB) of the Income-tax Act, 1961) — providing tax benefits that can partially offset the investment in achieving DGCA type certification and developing India-specific drone models.

For comprehensive guidance on establishing a drone manufacturing entity in India, our FDI advisory service covers entity structuring, regulatory compliance, and incentive applications. For companies comparing different entity structures, see our analysis of branch office vs subsidiary options.

Key Takeaways

• India's drone sector is growing rapidly with strong government backing, supported by initiatives across defence, agriculture, logistics, and infrastructure
• 100% FDI is permitted under the automatic route for civil drone manufacturing — defence drones follow the defence FDI policy of 74% automatic route with 100% via government approval
• Type certification from DGCA is effectively mandatory for every drone model — no drone other than a nano drone or model aircraft may be operated without conforming to a TC — and the process takes 75 days on paper, typically 3-4 months in practice, through QCI-accredited testing agencies
• A proposed incentive package of approximately INR 1,800 crore (Mission Drone Shakti, March 2026) — a 15x escalation from the original INR 120 crore PLI scheme — awaits formal notification
• Finished drone imports are prohibited (with narrow R&D and defence/security exceptions), but component imports are free — creating a clear manufacturing-in-India imperative for foreign companies