India plans a ₹12,000–15,000 crore PLI scheme from FY27 to boost small aircraft manufacturing, enforce 80% localisation, and support regional connectivity, leveraging strong airline orders and growing interest from global OEMs.
Small aircraft manufacturing set for big PLI boost in Budget 2026
India is gearing up to launch a major production-linked incentive (PLI) scheme to build a strong small aircraft manufacturing ecosystem at home. The civil aviation ministry is working on a plan worth around ₹12,000–15,000 crore, with an announcement expected in the Union Budget for FY27.
The scheme is proposed for six years starting 2026-27 and is focused on aircraft with fewer than 20 seats that typically serve regional and short-haul routes. Policymakers see this as a key step in turning India from a large aircraft buyer into a serious manufacturing hub.
What the new PLI scheme aims to do
The upcoming PLI scheme is designed to support the entire value chain, not just final assembly.
Key objectives include:
- Building a full local ecosystem for small aircraft design, components and systems.
- Reducing dependence on imports and moving beyond basic assembly work.
- Supporting regional connectivity by ensuring steady availability of small aircraft suited to Indian routes.
By focusing on sub-20 seat aircraft, the scheme ties directly into India’s push to improve last-mile air connectivity to smaller cities and towns.
Tough localisation rules and eligibility criteria
To receive incentives, manufacturers will need to meet strict localisation and investment conditions.
Planned requirements include:
- At least 80% domestic content for aircraft manufactured in India after 2028-29 to qualify for incentives.
- A minimum investment of ₹1,000 crore in aircraft and aircraft parts manufacturing in India since 2019-20.
The high 80% indigenisation threshold is deliberate, aimed at ensuring real manufacturing capabilities—such as design, systems, and key components—are built in India, rather than just importing kits and assembling them locally.
Possible incentives for airlines and buyers
The government is also exploring fiscal sweeteners for customers that place orders with India’s first large commercial aircraft final assembly line.
Features being considered include:
- Tax or fiscal incentives for airlines and other commercial buyers who order aircraft made on the Indian final assembly line.
- Benefits that are calibrated and gradually reduced as order volumes rise and the domestic manufacturing base becomes more viable on its own.
This dual approach—supporting both manufacturers and customers—is meant to generate enough initial demand to make local production commercially attractive.
Global players, Adani–Embraer interest and Hyderabad air show buzz
The policy push comes at a time when international and domestic players are actively exploring aircraft assembly projects in India.
Recent reports indicate that the Adani Group has signed an MoU with Brazilian aircraft maker Embraer to examine setting up a final assembly line in India for regional jets.
- These jets typically seat between 70 and 146 passengers and serve short- to medium-haul routes.
- A formal announcement around this partnership is expected around the Hyderabad air show, adding momentum to India’s aviation manufacturing ambitions.
Such projects can complement the small aircraft PLI by deepening the supply base and attracting more high-tech aerospace work to the country.
Riding on the world’s fastest-growing aviation market
The timing of the PLI scheme is closely tied to the boom in India’s civil aviation sector, now the fastest-growing market globally.
Domestic airlines, including the Air India group, IndiGo and Akasa, have together ordered more than 1,800 aircraft, creating a strong long-term demand pipeline.
Policymakers want to leverage this massive order book to:
- Anchor more manufacturing and assembly lines within India.
- Support the government’s regional connectivity programme by ensuring adequate supply of small aircraft for short routes.
This approach aims to turn India’s scale as a buyer into a strategic advantage as a manufacturer.
Impact on suppliers and aviation ecosystem
Industry players believe the framework could significantly benefit Indian tier-I and tier-II suppliers.
Companies such as Rossell Techsys, which already supply to global aircraft majors like Boeing, could see expanded opportunities as OEMs increase local sourcing to meet indigenisation norms.
Over time, a successful PLI rollout could:
- Deepen domestic supply chains across avionics, wiring, structures and interiors.
- Build more skilled jobs and high-value engineering capabilities in India’s aviation ecosystem.
In short: India’s planned PLI scheme for small aircraft manufacturing marks a strategic shift from being just a booming aviation market to building deep, homegrown industrial capability. By tying generous incentives to tough localisation and investment norms, the policy nudges global and domestic players to move beyond assembly and create real value in India’s aerospace supply chain. If implemented as proposed, it can simultaneously strengthen regional air connectivity, attract high-tech manufacturing, and open new opportunities for Indian suppliers in the global aviation ecosystem.