Friday, May 24, 2024

A&D Ecosystem In Uttar Pradesh: At The Cusp Of A Revolution

By Rakesh Mishra

Victor Hugo, the renowned French poet and novelist, famously stated, ‘Nothing else in the world…not all the armies…is so powerful as an idea whose time has come’. The evolution of India’s Aerospace & Defence industry, in general, and in the State of Uttar Pradesh, in particular, is one such idea. Propelled by the resolve of the Government of India towards Aatnirbharta’the Aerospace and Defence sector in India is at an inflexion point. The three services of one of the largest military forces in the world have ushered towards massive capability enhancement programs, and thus Ministry of Defence in India has set a target to achieve a turnover of Rs 1,75,000 Crores (US$ 25Bn), including export of Rs 35,000 Crore (US$ 5 Bn) in Aerospace and Defence goods and services by 2025.

Self-reliance in defence is now the pivot of India’s defence production policy. Over the years, significant improvements have been infused in procurement procedures, policies and facilitation of ‘Make in India’ initiatives which have provided significant stimulus to demand indigenous products. The Indian Defence industry, primarily catering to the needs of the armed forces, has evolved with a diversified product mix and market. Propelled by the recent successes in exports, India is set to realise its potential as an emerging defence manufacturing hub.

Over the years, the Department of Defence Production (DDP), Ministry of Defence, Government of India has facilitated the establishment of wide-ranging production facilities of various defence equipment through Ordnance Factories and Defence Public Sector Undertakings (DPSUs) and, from the year 2001, through licensed private sector companies. This has resulted in the developing of a diverse range of products such as arms and ammunitions, tanks, armoured vehicles, heavy vehicles, fighter aircraft and helicopters, warships, submarines, missiles, ammunition, electronic equipment, earth moving equipment, special alloys and special purpose steels. In the above context, the role of DPSUs, especially HAL, in handholding and creating an A&D manufacturing ecosystem in the country is worth mentioning. Today, numerous suppliers export components to A&D OEMs after acquainting themselves of the intricacies of A&D processes through HAL. 

The creation of Defence Corridors in the country is another landmark step towards indigenous capability generation. The Government has established two Defence Industrial Corridors (DICs) in the country, one in Uttar Pradesh, namely ‘Uttar Pradesh Defence Industrial Corridor’ (UPDIC) and the other in Tamil Nadu, namely Tamil Nadu Defence Industrial Corridor (TIDCO). A Defence Corridor worth Rs 20,000 Cr was announced by GOI in February 2018 at UP Investors’ Summit. Six nodes, namely Aligarh, Agra, Chitrakoot, Jhansi, Kanpur and Lucknow, have been identified for UP Defence Industrial Corridor. The nodes have been selected based on the high potential for creating an end-to-end ecosystem for Aerospace and Defence sector development covering design, engineering and manufacturing. 

Setting up of Defence Industrial Corridors in Uttar Pradesh was aimed towards enhancing indigenous production of defence and aerospace products, thereby reducing our reliance on imports and promoting export to other countries, which would also create employment opportunities and growth of private domestic manufacturers; Micro, Small and Medium Enterprises (MSMEs); and start-ups. UP Government promulgated the ‘Uttar Pradesh Defence & Aerospace Unit and Employment Promotion Policy’ in 2018, offering many incentives to the companies. A few of them are mentioned below:

  • Capital subsidy of 7% up to Rs 500 Cr to all D&A units set up in Aligarh, Agra, Lucknow and Kanpur nodes of UPDIC.
  • Capital subsidy of 10% up to Rs 500 Cr to all D&A units setting up in Jhansi and Chitrakoot node of UPDIC’s Bundelkhand region. 
  • Land subsidy of 25% for Anchor D&A units setting up in UPDIC.
  • Transport subsidy for Anchor units
  • Transfer of Technology related incentives.

In the newly developed industrial area in the defence node, electrical systems, water supply, sewer and road facilities are being provided by Govt. of UP. Moreover, a peripheral boundary wall will also be constructed by Govt. of UP for demarcation and protection of the land. Uttar Pradesh Expressways Industrial Development Authority (UPEIDA) is the nodal agency for UP Defence Corridor.

To date, 105 Industrial and Institutional MOUs have been signed between UPEIDA and various private/public sector organisations, generating total estimated costs of Rs 12162 Cr. Thirty-five proposals with potential investments of approx. Rs 4558 Cr have been finalised, and land has been allotted to the industries.

UPEIDA signed MoU with Bharat dynamics Ltd. for manufacturing a Missile Propulsion system (estimated investment of more than Rs 400 Cr in phase-1) in the Jhansi node of UPDIC. Uttar Pradesh may soon be the State where the next-generation BRAHMOS (BRAHMOS-NG) and other missiles will be manufactured as the corridor has started taking shape in its six nodes. BRAHMOS Aerospace, the joint venture of DRDO of India and NPO Mashinostroeyenia (NPOM) of Russia, shall be setting up a modern production facility in Lucknow with an initial investment of Rs 300 Cr. Adani Defence and Aerospace are setting up an Integrated Ammunition Manufacturing facility aiding the development of the world-class ecosystem in the State in Kanpur node with an investment of Rs 1500 Cr.

The Ministry of MSME will set up a new Technology Centre/Extension Centre (TCEC) at the Jhansi node of UP through PPP mode. Defence Testing Infrastructure in UPDIC is also being created for Communications, Mechanical, Material and Unmanned Aerial Systems. DRDO is planning to set up Defence Technology and Test Centre (DTTC) at the Lucknow node.

Micro, Small & Medium Enterprises are an integral part of the successful development of the Defence Corridor by UPDIC. The investments in the corridor have been attracted from Anchor industries, MSMEs, including Foreign Original Equipment Manufacturers (FOEMs) and Start-ups. Even under the Offset policy, a higher multiplier of 2.0x level has been assigned for investment in Defence Corridors.

The author has reasons to believe that for the first time in Indian A&D history, especially in Uttar Pradesh, we are standing at the cusp of a revolution. The industry has matured past the threshold of producing products with globally accepted quality, the more prominent players like HAL, BEL, BDL, Ordnance factories etc., are in a true sense willing to engage with private players at multiple levels, and the industry is being backed by the Governments at the centre and State like never before. It can also be argued convincingly that global opportunities are also presenting themselves in a commercially meaningful way. ‘Make in India, make for the World’ is not a mere slogan anymore. It is for the Indian industry to synergies itself, and the mantra for success is to collaborate, not compete. The public-private partnership in the A&D industry can very well lead to unfathomable expansion of the Indian A&D Market.

In this light, the role of start-ups and innovators is also worth a mention. Today, HAL is able to announce a futuristic project like ‘Combat Air Teaming System’, which essentially is an autonomous manned and manned combat aircraft air teaming system; as it is ably supported by start-ups who are producing products at cutting-edge technology.

Central and State Governments, especially the Government of Uttar Pradesh, are promoting the development of the defence and aerospace ecosystem in a big way. Uttar Pradesh is the 4th largest State in the country and is home to nearly 17% of India’s population. It is only natural to conclude that an ‘Aatmnirbhar Bharat’ in Aerospace & Defence would pave the way for an ‘Aatmnirbhar Uttar Pradesh’.

The author presently serves as Chief General Manager, Defence Corridor of UP Expressways and Industrial Development Authority (UPEIDA) after retiring from HAL, Accessories Division, Lucknow as General Manager 

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