UP govt drafts new defence manufacturing policy to woo private sector

Eyeing a major pie of the lucrative indigenous defence manufacturing space, the Uttar Pradesh government has drafted a new defence manufacturing policy.

The state is also hosting the 11th national defence expo in Lucknow on February 5-8, 2020 and the new policy will be implemented before the flagship event for greater leverage and traction.

The policy will soon be placed before the state cabinet for approval, UP industrial development minister Satish Mahana told Business Standard here today. Several amendments have been proposed in the existing Defence and Aerospace Policy 2018 policy to make it more attractive for the private sector.

The new policy is aimed at providing a major leg-up to the proposed UP Defence Corridor, which is estimated to attract investment to the tune of Rs 20,000 crore. The Corridor would span six districts viz. Aligarh, Agra, Jhansi, Kanpur, Lucknow and Chitrakoot and seeks to energise the existing defence related undertakings in the region too.

The state government had also studied policies of the peer states, especially Maharashtra, Tamil Nadu and Gujarat to draft a matching policy framework, apart from taking the feedback of the private sector players looking to invest in the state's defence manufacturing sector.

The amendments in the policy mainly pertain to giving incentives on land and capital costs, payment of interests, state goods and services tax (SGST), electricity duty etc.

So far, the state government had signed memorandums of understanding (MoU) worth Rs 4,000 crore with public and private sector companies for setting up units in the Corridor, while the government has identified 5,000 hectares for acquisition. Besides, investment worth almost Rs 500 crore was already in the pipeline.

Since, UP is targetting to become a $ trillion economy by 2024, the Yogi Adityanath government is accelerating all mega infrastructure projects to create mass jobs and boost economic activities, including Defence Corridor, Purvanchal Expressway, Bundelkhand Expressway, Ganga Expressway, Jewar International Airport (Noida) etc.

Meanwhile, the process of acquiring land for the Corridor continues and the government intends to acquire nearly 3,000 hectares in the initial phase. Sources claim that the land acquisition was a time consuming process, but things were progressive well.

On February 15, 2019, Prime Minister Narendra Modi had laid the foundation of UP Defence Corridor in Jhansi district. He had first announced about the Corridor at the inauguration ceremony of UP Investors Summit in Lucknow on 21 February, 2018. The Corridor is expected to create about 2,50,000 new job opportunities.

India is the world's largest military hardware importer and among top military spenders. For meeting modernisation needs of the armed forces, India will acquire equipment worth US$ 250 billion by 2027. However, the current delivery capacity of the domestic defence sector is merely US$ 75-80 billion annually, indicating huge potential for indigenous industry.