The Yogi Adityanath government to make arms, ammunition and explosives manufacturing eligible for incentives

NEW DELHI: 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 nodes of Lucknow, Kanpur, Agra, Aligarh, Jhansi and Chitrakoot.

Investments worth Rs 4,000 crore have already been received and the project is expected to attract Rs 20,000 crore. The UP government’s proposed changes to its Defence Policy-2018 take a leaf out of the policies of Gujarat and Tamil Nadu.

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.

Another proposal is from Gujarat’s policy – to attract a big portion of fresh offset obligations to be discharged by companies in India over the next decade.

“Government will provide necessary support to industry for interaction with Defence Offset Facilitation Agency to encourage foreign/domestic investors to invest in UP Defence and Aerospace Parks/Clusters to meet their offset contractual obligations,” says the proposed policy, a copy of which ET has reviewed.

It proposes to offer 30% reimbursement of purchase price of land and full waiver of stamp duty for such units.

The UP cabinet will decide on the proposed policy, a senior state government official told ET.

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.

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.