Steady Progress in Defence Industrial Corridors

by Feb 18, 2022Defence & Foreign Policy0 comments

The Government of India has established two Defence Industrial Corridors (DICs) in the country, one in Uttar Pradesh namely Uttar Pradesh Defence Industrial Corridor (UPDIC) and other in Tamil Nadu namely Tamil Nadu Defence Industrial Corridor (TNDIC) with an aim to attract investment of about Rs 10,000 crore in each corridor.

Six nodes, namely Aligarh, Agra, Chitrakoot, Jhansi, Kanpur and Lucknow have been identified for UP Defence Industrial Corridor.

Five nodes, namely Chennai, Coimbatore, Hosur, Salem and Tiruchirappalli have been identified for TN Defence Industrial Corridor.

The nodes have been selected based on high potential for creation of end-to-end ecosystem for Aerospace and Defence sector development covering design, engineering and manufacturing.

As per information received from State Governments, in UP Defence Industrial Corridor, Uttar Pradesh Expressways Industrial Development Authority (UPEIDA), the nodal agency, has signed 62 (sixty-two) Memorandum of Understandings (MoUs) with private / public industries, worth potential investments of approx. Rs 8,638 crore. Out of 62 MoUs, 25 (twenty-five) proposals with potential investments of approx. Rs 2,527 crore have been finalized and land has been allotted to the industries.

The UP government has promised the following facilities:

(1) Assured water supply and uninterrupted electricity (132 KVA) along with pelican wire fencing boundary wall at the site

(2) Connectivity with 4-lane heavy-duty highway connected with Bundelkhand Expressway and Delhi-Jhansi

(3) Single Window approvals and clearances to Defence and Aerospace (D&A) manufacturing units via Nivesh Mitra, the single window system of the state

(4) Labour Permits for D&A industry towards flexible employment conditions

(5) Simple Procedures and rationalised regulatory regime with easy reimbursement of incentives and subsidies

In TN Defence Industrial Corridors, Tamil Nadu Industrial Development Corporation (TIDCO), the nodal agency, has made arrangements through MoUs etc. for potential investment of Rs 11,153 crore by 40 Industries.

Tamil Nadu holds the following strategic advantages which makes it a suitable destination for a defence corridor:

(1) The large coastal line which has four large seaports (three government and one private) and 22 minor ports

(2) The state has four international airports at Chennai, Coimbatore, Trichy, Madurai; and two domestic airports at Tuticorin and Salem

(3) A power surplus state with renewable energy capacity of 11,113 MW

(4) Tamil Nadu’s capital city Chennai is connected to the world by three submarine cables providing a bandwidth of 14.8 Tbps

(5) A destination of choice for Korean investors; the state is the largest Recipient of Korean Foreign Direct Investment (FDI) to India

Setting up of Defence Industrial Corridors aim to catalyse indigenous production of defence and aerospace related items, thereby reducing our reliance on imports and promoting export of these items to other countries which may create ample employment opportunities and growth of private domestic manufacturers; Micro, Small and Medium Enterprises (MSMEs); and start-ups.

UP Government promulgated ‘Uttar Pradesh Defence & Aerospace Unit and Employment Promotion Policy’ in 2018 and TN Government promulgated ‘Tamil Nadu Aerospace and Defence Industrial Policy’ in the year 2019, offering incentives to the companies in form of Stamp duty incentives, Land cost incentives, Electricity tax exemption etc. Further, basic infrastructure support such as internal roads, drainage system, water and electricity supply etc. are also provided by the State Governments.

Micro, Small & Medium Enterprises are the integral part for the successful implementation of both the corridors attracting investments in Aerospace and Defence sector. Presently out of total 81 MOUs signed by both the State Governments in two Defence Industrial Corridors, 30 are with MSMEs. In both the corridors, investments have been attracted from Anchor industries, MSMEs, including Foreign Original Equipment Manufacturers (FOEMs) and Start-ups.

Even under Offset policy, higher multiplier of 2.0x level has been assigned for investment in Defence Corridors. As per the provisions of FDI policy in Defence sector, foreign investments in the sector is subject to security clearance by Ministry of Home Affairs. Further foreign investments in the defence sector are also subject to scrutiny on grounds of National Security and Government reserves the right to review any foreign investment in the Defence sector that affects or may affect National Security.

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