The Indian government is poised to introduce a substantial ₹10,000 crore incentive package for the drone manufacturing sector in the forthcoming Union Budget 2026.

This five-year scheme, tentatively dubbed Drone Shakti, seeks to propel India towards becoming a global hub for civilian drone production by offering sustained fiscal support to domestic manufacturers.

Unlike the existing Production-Linked Incentive (PLI) scheme, which emphasises value addition and output, this new initiative combines capital expenditure subsidies with manufacturing-linked incentives. 

The Finance Ministry has granted in-principle approval, with plans to allocate the full outlay upfront, aligned to the 16th Finance Commission period for long-term certainty.

The first tier provides a 10-15% subsidy on capital investments for establishing drone production facilities and ancillary infrastructure. Eligibility hinges on achieving minimum revenue thresholds and completing investments within stipulated timelines to expedite capacity creation.

Complementing this, the second tier offers a 10-15% incentive tied directly to manufacturing output, designed to enhance price competitiveness against imported drones. Domestic producers currently face cost disadvantages due to reliance on overseas components like sensors, avionics, and propulsion systems.

A graded structure accommodates late entrants, with tapered incentives to ensure fairness while prioritising early adopters. The scheme remains open throughout its five-year duration, preventing exclusion for companies joining subsequently.

Mandatory local content norms of 50-60% form a core eligibility criterion, compelling genuine manufacturing over mere assembly. This addresses India's persistent dependence on imports for critical parts, fostering higher value addition within the country.

Positioned as complementary to the drone PLI, the package avoids overlap by focusing on upfront capital support rather than solely rewarding production. It marks one of the government's boldest multi-year commitments to a sunrise sector, signalling strategic intent.

The Drone Shakti initiative, first unveiled in Budget 2022-23, originally prioritised drone adoption in agriculture, logistics, mapping, and infrastructure via Drone-as-a-Service models. This manufacturing push extends that vision, bridging gaps in hardware production capabilities.

Industry observers anticipate benefits for firms like Zen Technologies, Paras Defence and Space Technologies, and IdeaForge Technology, which stand to gain from enhanced scale and cost efficiencies. The package could catalyse investments, reducing import reliance and bolstering self-sufficiency.

Amid rising geopolitical tensions and defence needs, the scheme aligns with broader national goals for indigenous aerospace and UAV ecosystems. It promises to accelerate R&D, skill development, and supply chain localisation in a sector projected for exponential growth.

Reports from credible sources, including Moneycontrol, underscore the proposal's momentum as Budget 2026 preparations intensify. Final details may evolve, but the ₹10,000 crore commitment—equivalent to approximately $1.1 billion—heralds a transformative phase for Indian drone manufacturing.

​IDN (With Agency Inputs)