India targets increased investment in defence corridors

BrahMos Aerospace's proposed facility in Lucknow will be part of India's defence industrial corridor in Uttar Pradesh. (Janes/Patrick Allen)

The Indian Ministry of Defence (MoD) is looking to introduce a scheme to incentivise investments in its two new defence industry corridors, Indian Defence Minister Rajnath Singh has announced.

Singh referenced the potential policies on 12 November at an event to mark the development of two new industrial facilities in the northern corridor in Uttar Pradesh.

According to Singh, the Indian government is “considering a centrally sponsored scheme” to promote investment in the corridors in Uttar Pradesh and the southern state of Tamil Nadu, in line with a wider objective to develop India's defence industry ecosystem.

The scheme is expected to offer defence investors in the corridors with sweeteners such as tax relief and other benefits. The two corridors were announced by the government in February 2018.

Highlighting opportunities for local investors, Singh also inaugurated on 12 November what the MoD said is the “first operationalised private sector defence manufacturing facility” in the Uttar Pradesh corridor.

The facility – based in Lucknow – is operated by Aerolloy Technologies, a subsidiary of PTC Industries, and is focused on producing components for military platforms, which include aircraft and submarines.

Singh also laid the foundation stone for a new defence metals manufacturing facility, also run by PTC Industries. The MoD said the facility will produce raw materials for titanium and other alloys used in defence and aerospace manufacturing.

Under India's foreign direct investment (FDI) rules, foreign companies can invest 74% in a local defence company without government approvals. Up to 100% is permitted with government approvals. As of June 2021, total FDI in India's defence sector is INR615.3 million (USD8.3 million), according to government statistics.