- Land procurement by UPEIDA identified
- Defence manufacturing looks up in Uttar Pradesh
By Sangeeta Saxena
Lucknow/New Delhi. 31 July 2019. Defence Production, defence industry and defence corridor have become buzz words in the Uttar Pradesh of today, a state of India which since inception was synonymous with politics, crime and underdevelopment. And all this despite giving half a dozen Prime ministers to the nation.
The Modi1 government decided to use this hinterland which also has a state government run by his party, in creating an ecosystem for defence manufacturing and thus came up the three defence corridors, one each in Agra-Aligarh, Jhansi-Chitrakoot and Lucknow-Kanpur. The setting up of Defence Corridors will facilitate in the development of internationally competitive enterprises to manufacture and maintain all major defence eco-system and platforms within the country in order to become strategically independent in defence manufacturing.
The Yogi Adityanath government plans to modify its policy for the upcoming ‘defence corridor’ to make arms, ammunition and explosives manufacturing eligible for incentives and attract small and medium enterprises as well as foreign and domestic investors seeking to meet their offset obligations. The foundation stone of the corridor, a project of UP government and the Centre, was laid by PM Narendra Modi in February and is set to come up on over 5,000 hectares around the six nodal cities.
Union Minister for Home Affairs Amit Shah recently inaugurated the Second Ground Breaking Ceremony of the UP Investors Summit, in Lucknow . He laid the foundation stone of over 250 projects worth Rs. 65,000 crores. And defence and aerospace is an important part of this . Investments worth Rs 4,000 crore have already been received and the project is expected to attract Rs 20,000 crore.
The incentives planned for companies include upfront payment of 10% for land, with the rest payable over 10 years at 12% simple interest, and reimbursement of 25% of the land cost at the purchase rate rather than the cost or circle rate. A major change proposed is inclusion of the manufacture of arms, ammunition and explosives as an investment area for the defence corridor. These areas will be eligible for higher incentives as proposed in the new policy. It proposes to offer 30% reimbursement of purchase price of land and full waiver of stamp duty for such units.
A new feature is the setting up of a common facilitation centre to provide the support to micro, small and medium enterprises within the corridor. The UP government may become an equity partner in the CFC by providing land plus a soft loan.
Higher incentives are also on the anvil. For new projects and expansion, investments up to Rs 10 crore are proposed to be given a back ended capital subsidy at the rate of 10% for anchor units and 5% for vendor/MSME units.
Earlier in June the UP Industries Minister Satish Mahana said that the supervising consultant for land acquisition has been appointed and the process of allotment of land to the investors and entrepreneurs will be taken up after the land acquisition process. “ The industries department will soon organize an exhibition in Kanpur that will provide a platform to buyers and sellers and as many as 240 products from the sector will be showcased. Clusters will be developed for the defence corridor”, he added.
Units established in the Bundelkhand region of the state will be provided an additional capital subsidy of 50% over and above these limits. Aircraft maintenance, repair and overhaul could get 50% reimbursement of state goods and services tax.
The oldest defence public sector unit in the state Hindustan Aeronautics Limited (HAL) has announced investment of ₹ 1,200 crore in the UP defence industrial corridor. The Indian aerospace major already has three units in UP one each in Kanpur, Korwa and Lucknow. There are Ordnance Factories in Kanpur, Tundla, Korwa, Ghaziabad and Shahjahanpur and Bharat Electronics Limited in Ghaziabad.
MoUs have been signed for investment of approximately ₹ 4,000 crore for the corridor which also means creation of nearly 2.5 lakh job opportunities. The UP Government has earmarked 5,000 hectares for the corridor. The Chief executive officer of UP expressway industrial development authority (UPEIDA) Avneesh Awasthi informed that the UPEIDA has been selected as the nodal agency for the land acquisition work. Out of the 5,000 hectares Jhansi has 3,025, Aligarh 285, Jalaun , Agra 100, Chitrakoot 500 and Kanpur 1000 .
UP has one of the largest exporter of security equipment and the oldest defence private sector is MKU based out of Kanpur. “ The serious efforts made by the U P Government to kick start the U P Defence Corridor are extremely laudable. They have been regularly engaging with both the industry and the Ministry of Defence and seeking their inputs to fine tune their policies and make them industry friendly. Many of the suggestions made by industry are under active consideration and I am confident the final policy will not be found wanting,” said Manoj Gupta Chairman MKU.
Another feather on UP’s defence manufacturing cap is Indo-Russia Rifles Private Limited the rifle-manufacturing facility in Korwa, Amethi. The factory is a joint-venture of the Ordnance Factory Board of India and Kalashnikov Concern of Russia, with Rosoboronexport holding a minority stake and will produce 750,000 AK-203s, a 7.62×39mm variant from the AK-100 family. The factory is a joint venture between three companies. The Ordnance Factory Board (OFB) owns the controlling stakes of 50.5% while Kalashnikov owns 42% stake followed by 7.5% stake owned by Rosonboronexport.
The private sector which till now was at a minimal participation level in defence manufacturing gets a major boost and the process is already underway. The industry should in continuity give its suggestions. The government keeps working irrespective of who runs it. The creation of the UP Defence Corridor is an exercise by the UP state government to kickstart the creation of a world class manufacturing hub for the Indian and global aerospace and defence industry. To maximise the potential of the endeavour it should strive towards building a seamless support system that encourages companies to come and participate in this one of a kind project.