Drone firms in talks for self-regulation of standards to boost localization

Three senior industry executives confirmed to Mint that the discussions between India’s drone industry and ministry officials have been focused on establishing a self-regulatory set of standards for localization, collaborating on research and development (R&D) programmes for advanced drone technologies, and building proprietary, cutting-edge drones akin to how specialized companies in the US have done.

Talks on these standards have picked up pace in the aftermath of the devastating terrorist attack on Hezbollah carried out by Israel.

“Discussions are still at an early stage, but the government recognizes that there is an increasingly urgent need for India to create its own advanced drones to be used in defence forces. Further, component localization is not just a matter of generating more business value in the drone sector—it is a matter of national security. A number of cross-ministerial discussions have taken place on how the localization of component manufacturing can take place for drones," a senior government official told Mint.

Localization of drone components

The official further added that component localization for drones has “considerable overlap" with other electronics industries, such as smartphones and home appliances. “Aspects like cameras, display and software should be increasingly localized, as should software-based systems such as autopilot. We’re promoting a self-regulatory stance for the industry since the market for drones in India is not big enough for the Centre to tie it down with regulatory strictures," he said.

Multiple companies, including the BSE-listed IdeaForge Technology Ltd, have also been involved in these discussions.

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“There is an increasing amount of collaborations between drone companies—we’re in talks with various industry stakeholders to arrive at a self-regulatory consensus, based on the approach that the government has suggested. We’re looking to complement R&D initiatives and develop advanced technologies and their respective intellectual properties, so that even the most advanced defence drones do not need to be sourced from abroad," said Ankit Mehta, chief executive of IdeaForge.

Prem Kumar Vislawath, chief executive of Hyderabad-based Marut Drones, said that three key aspects discussed as part of the DGCA’s push to encourage self-regulation of operational standards for drones included batteries, encrypted software platforms, and tamper-proof collision avoidance systems.

“We’ve had multiple discussions, with the idea that increasingly sensitive components and sub-components need to be localised by design. The discussions have been to set-up a graded approach to self-regulatory mechanisms, with one-year, three-year and five-year targets for the drone sector," Vislawath said.

Industry stakeholders take this to be a reasonable approach. Arun Nagarajan, partner for digital and emerging technologies, and lead for drone centre of excellence at consultancy firm EY India, said, “For India’s larger drone companies, there is significant dependency on defence contracts for generating revenue. This, though, is in response to global trends, and could continue. To respond to this sensitivity, local manufacturing of components is yet to pick-up pace in India—today, most software and battery are imported from abroad."

“If this is replaced with local solutions, we may yet be able to establish trust and avoid mishaps," he said. Establishing standardization of components is thus crucial, and the same may also come under a certification programme to simplify the industry. That, though, is a gradual next step—for now, the Centre is offering companies with their own preferred proposals to carry this out, instead of enforcing a solution upon them, Nagarajan further added.

Incentives for the sector

This approach will tie-in with the Centre’s fresh tranche of incentives for the drones industry. On 17 September, Mint reported that a new, ₹3,000-crore ($360 million) incentives scheme for drones was being worked on, involving multiple ministries and government bodies including the DGCA, and the Ministry of Electronics and Information Technology (Meity). Out of this fund, ₹1,000 crore ($120 million) is expected to be earmarked for incentivizing private-sector R&D—which Mehta and Vislawath said will be crucial for the sector.

Also read | Will a new incentives package help India's drone industry lift off?

Not everything, however, is smooth sailing. Mughilan Thiru Ramasamy, chief executive of Skylark Drones, said that while he, too, was privy to DGCA’s self-regulatory push, “the discussions are still far away from being at an advanced stage for the industry to implement."

“Most importantly, what India needs to build today is a bigger market for drone companies to sell to," Ramasamy said. There are mandatory drone usage requirements in only two recognized industries in India, of which one is mining. Amplifying the usage of drones is critical to develop a bigger market—otherwise, it is a chicken-and-egg situation. "We can adopt a self-regulatory set of standards, but these standardization initiatives will only make sense when there is industrial scale to cater to," he said.

Orders need to reach critical mass

He added that most current enterprise orders for drones are to the tune of “hundreds of drones—which is nowhere close to the kind of industrial scale that other industries operate at."

Drone companies, on this note, hope that adopting a set of standards and uniformity across India’s drone offerings can also help build export-worthy products.

“We’re free to export our latest innovations to markets outside of India, which can potentially contribute to a sizeable quantum of revenue in the long run," IdeaForge’s Mehta said.

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A senior industry consultant, citing sensitivity of the topic at hand, further added on condition of anonymity, “Exports are not an option—look at the volume of the Army’s drone contracts with the likes of IdeaForge. They are all limited in size, and are far smaller from what companies in the US procure. In the long run, the commercial viability of the drones sector will be hinged upon exports—and this is what beckons the need for uniformity of manufacturing, quality, and specifications standards for drones in India."

Skylark’s Ramasamy further added that before self-regulation of standards, a Centre-backed incentivization of drone designing in India would help boost the market. “Add a design-linked incentives programme with boosting of industries where drone usage is mandated, and then we’ll start developing a scale where a self-regulatory set of standards is necessary. Until this develops, it is too early for regulations tying the sector down," he said.