View: Ease regulations to make India a drone hub

By: Bibek Debroy & Aditya Sinha

As the sale of cigarettes and alcohol during the Covid-19 lockdown shows, any form of restrictions on usage has always been detrimental to industry, consumers as well as the State exchequer. The only party it benefits is the seller, who resorts to black-marketing, selling it at marked-up prices. Restrictions also act as a discouragement to industry to invest capital in sectors where either production or consumption is regulated, unless the gains offset the investment significantly.

The market for non-military unmanned aerial systems (UAS) — drones — in India has been marred by restrictive policy, which can stagnate this industry in its infancy. The Indian UAS market is expected to touch $885.7 million, making it about 4% of the nearly $21.47 billion global market. At the same time, it accounts for 20% of global imports of UAS, making it the fifth-largest importer of drones. This indicates the presence of demand beyond the military. An Ernst & Young (EY)-Federation of Indian Chambers of Commerce & Industry (Ficci) joint report, ‘Make in India for Unmanned Aircraft Systems: Awaiting its ‘Kitty Hawk’ Moment’ (bit.do/fFPgF), explains usage of UAS in the power and utility industries, agriculture, highways, mining and railways.


However, India is a laggard, compared to non-military UAS manufacturing countries, especially China and the US. This can be attributed to the absence of adequate demand for commercial UAS in domestic markets because of drone regulations that are too obtrusive.

In October 2014, India banned the operation of drones. However, this did not deter individuals from buying recreational drones — primarily manufactured by a Chinese manufacturer, DJI — from the shadow market. According to a study reportedly done by intelligence agencies, there are over six lakh unregulated drones of various capacities and sizes. Most of these drones have been bought from shadow markets, detrimental for both the consumer and government revenue.

The Drone is Familiar
Drone regulations were notified by the civil aviation ministry in early 2019, reversing the earlier ban. What followed is not much of an improvement over the ban — a heavily guarded drone usage policy with a ‘No Permission, No Take-off’ (NPNT) clause, the only one of its kind globally. All drone manufacturers need to have an NPNT software add-on on their drones. Without it, no drone manufacturer can sell its drones in India.

These regulations heavily rely on the functioning of a ‘digital sky’ platform, which is supposed to be the only platform that can grant automated permission to own and operate drones. However, the platform is still non-operational. Thus, there is no other way for drone operators to seek permissions to operate UAS legally.

Apart from permit-oriented restrictions imposed, there are the hardware specifications that have to be met to be regulatory-compliant. Even if a company manages to manufacture software- and hardware-compliant drones, it is a monumental task for the regulator to monitor and audit the hardware and software capabilities of drones. The regulator also lacks facilities to test and certify UAS for airworthiness.

Moreover, since these specifications are not mandated by any other country, international manufacturers are unlikely to make changes to their specifications just for a 4% sub-market. This is India’s loss. Drones can reduce costs of compliance, provide high-quality information (including areas difficult to extract data from, such as hilly terrain) and enable real-time monitoring. Domestic manufacturers can conceivably make concessions to meet the hardware specifications. But this will only drive up the cost of Indian-made drones, which are already 20-30 times costlier than those built by comparable international competitors.

This further perpetuates the vicious cycle, whereby it dries up funds for R&D and stifles the already burdened domestic UAS industry. UAS industries in China and the US have matured to levels where their markets have seen a lot of capital invested in these systems, and are driving innovation. The conservatism of regulation is both predictable and understandable, because, globally, drone laws are still evolving. However, this conservatism may prove to be detrimental if India wants to become a non-military UAS manufacturing hub.

Drone regulations need to be tweaked by addressing concerns of all the stakeholders. Although futuristic, the digital sky platform should be further upgraded. The platform should be fed with back-end data to grant automated permissions. Unless the data bank within the platform is able to process the flying location and flying path, it would be difficult for it to grant automated permissions.

Prepare for the Lift-Off
Merely addressing domestic demand issues will not suffice. Phased manufacturing plans can be a tool to encourage international drone manufacturers to ‘Make in India’. Initially, tariffs can encourage manufacturers to assemble semi-knocked-down drone units in India. Thereafter, assembling of completely knocked-down units should be incentivised. And, finally, regulatory and fiscal incentives should be aligned to ensure that all drone components are manufactured in India.

Hopefully, soon, the policy will be reoriented to equip the Indian UAS ecosystem with the necessary flight. Regulation should not stifle. Otherwise, India-made drones will do little work and Make in India, for this segment, will remain a flight of fancy.

(Debroy and Sinha are chairman and assistant consultant, respectively, Economic Advisory Council to the Prime Minister)