Lucknow: A little over two years after Prime Minister Narendra Modi laid the foundation for setting up the ambitious defence industrial production corridor in Uttar Pradesh, the state government is taking baby steps to get the project off the ground.
The Uttar Pradesh Expressways Industrial Development Authority (UPEIDA), the state government-run nodal agency for the defence corridor project, has started the process to allot land to 17 companies for setting up their manufacturing units.
However, while many domestic manufacturers have evinced interest, the response from foreign manufacturers has been lukewarm.
Senior UPEIDA officials told ThePrint that as on 7 April, out of the total 67 Memorandums of Understanding (MoUs) inked with defence manufacturing companies, 22 have materialised so far.
“A total 22 MoUs have been finalised for land allotment. An estimated proposed investment of Rs 1,566.75 crore is expected when these companies will become operational,” Colonel (retired) K.S. Tyagi, senior defence advisor in UPEIDA told ThePrint.
“Land has been allotted to 17 companies. The process of issuing allotment letters has started following which physical handing over of land will happen,” he said.
The defence corridor envisages creating land banks around six nodes in the state, including in the backward Bundelkhand region, for defence companies to set up their manufacturing units. The six nodes — Lucknow, Kanpur, Jhansi, Agra, Aligarhi and Chitrakoot — will be connected to the different upcoming expressways for better connectivity.
The UPEIDA has already created about 1,000 hectares of land bank in Jhansi, approximately 100 hectares in Chitrakoot, about 250 hectares in Kanpur and another 78 hectares in Aligarh for the project.
Speaking to ThePrint, Awanish Awasthi, state home secretary and CEO, UPEIDA, said, “We have allotted all land on the Aligarh node, where investment worth Rs 1,500 crore is happening. We have started the land allotment process in Kanpur and Jhansi nodes as well.”
“With the support of the central government, we hope to bring big investments in aircraft, land systems, missiles, ammunitions among others,” he added.
“Work is underway to create land banks in Lucknow and Agra. Creating a land bank is a time taking process. We took one and a half years to create a land bank,” said a UPEIDA official who did not want to be named.
The UP defence corridor is one among the two that was announced by the then finance minister Arun Jaitley in his 2018 budget speech. The other corridor is being developed between Chennai and Coimbatore.
International companies yet to make presence felt
While Indian companies are coming forward, big international names are still shying away from investing in the UP corridor.
The lukewarm interest has been despite the fact that over the last few years, the Modi government has opened up the defence sector for foreign investment as part of its push to encourage global manufacturers to produce locally.
Except for a South African company, Milkor Defence Systems, which manufactures multi barrel grenade launcher systems, all the other companies that feature in the land allotment process are small- and medium-sized domestic firms.
These include Ancor Research Labs LLP, which manufactures drones, and has proposed investment to the tune of Rs 550 crore. The company has been allotted 10 hectares land. Jai Sai Anu Overseas Private Limited has been allotted 4.5 hectare for setting up a precision components unit. It has proposed to make an investment of Rs 100 crore.
Werywin Defence Pvt. Ltd has been allotted 0.5 hectare for manufacturing small arms, and has proposed to invest Rs 65 crore. New Space Research and Technologies Pvt. Ltd has been allotted 3.5 acres and has proposed to invest Rs 35 crore to manufacture UAVs. Deep Explo Equipment Pvt. Ltd has been allotted 1 hectare for setting up its unit for manufacturing metallic parts for grenades and explosives.
Tractrix Opto Dynamic LLP has been allotted 1.4 hectare for its proposed Rs 40 crore investment for manufacturing precision and optical instruments.
Senior UPEIDA officials said currently talks are on with some big domestic and international companies, but nothing has been firmed up as yet.
Three big names in race for CFC
So far, only three big names — Tata Technologies, a subsidiary of French aerospace company Dassault Aviation, and Siemens — have lined up to invest. But it’s not for setting up their manufacturing unit.
These three are in the race for setting up the Common Facilitation Centre (CFC) in Lucknow, which will be a state-of-the-art, technology driven centre for design.
Explaining the CFC concept, Tyagi said, “We will facilitate all industries to prototype, design components here. For instance, if the Air force wants a part, which till now they were importing from Russia… now they are not getting a small part. They will come to us with a proposal that this is the part we want. So in our CFC, we will design, we will prototype, we will carry out everything and we will give it to the entrepreneur. Entrepreneur will produce and give it back to the Air Force.”
The three companies have participated in the bid for setting up the CFC.
Senior UPEIDA officials told ThePrint that the final bidder will be selected soon, based on how much they want to invest and the technology they plan to introduce. “Whosoever is offering more technology driven skilling, more machines, more investments… will be selected,” said the official quoted above.
The UPEIDA is also trying to bring the Army on board.
Tyagi said, “We are still evolving. Soon, we will start physically handing over land one by one. Thereafter the companies will bring their projects and we will approve.”
The UPEIDA is also developing the infrastructure in the defence corridor. “We will develop internal approach roads, drainage systems, water, electricity, security wall of 12 ft along the periphery, street lights, storm water drainage system, etc. This basic infrastructure will be provided by UPEIDA, free of cost,” the second official said.
What the companies say about investment
Entrepreneurs who have got the land in the defence corridor say the incentives given by UPEIDA, which include a 20 per cent discount on land, good location and connectivity to Delhi-NCR, were the primary reasons behind their investment.
Mohit Sharma, partner in Werywin Defence, said the company was planning to set up another unit in Himachal Pradesh, when the UP defence corridor project was launched.
“Initially we were skeptical of investing here. But the incentives the UP government was giving to investors and the good connectivity to Delhi and outside — be it the upcoming Jewar airport in Greater Noida or the expressways — helped us decide in its favour. The quick approvals by UPEIDA ensured that the land allotment process was completed in 40-45 days,” he said.
The Lucknow-based company, with an annual turnover of around Rs 10 crore, has been allotted land on the Aligarh node. The firm has been in the arms and ammunition sector for the past four decades and runs retail firearm outlets in Western Uttar Pradesh.
“We are now foraying into defence manufacturing and it made sense for us to buy land and set up our manufacturing unit in UP,” said Sharma.
Lalesh Saxena, CEO of Deep Explo Equipment, which has been allotted land in the Aligarh node said, “We were taken aback when our proposal to set up our unit to manufacture small critical components for missiles, metallic parts for grenades, explosives was accepted by UPEIDA in record time and land allotted within a month.”
Deep Explo Equipment has an annual turnover of about Rs 12 crore and is headquartered in Aligarh. Saxena said the general perception was that it will take years before the proposal is approved and land allotted.
But not only was the allotment fast-tracked but UPEIDA is also developing infrastructure in the corridor before handing over land to investors.
“Because of good connectivity, distance between Jhansi and Lucknow (both are part of the corridor) will reduce from the current 8-10 hours to 3-4 hours. Once the corridor becomes operational, it will open up the market for defence manufacturing… it has huge potential,” Saxena added.
(Edited by Amit Upadhyaya)