Maharashtra unveils policy to draw $5 bn defence investments

State plans Rs 1,000 cr special fund, fiscal & non-fiscal sops

The Maharashtra government on Saturday released a draft defence and aerospace policy to attract investments of $5 billion and create 100,000 jobs in the next five years.

The proposed investments are expected in Pune, Nashik, Nagpur, Ahmednagar and Aurangabad.  

The state government aims to establish Maharashtra as the preferred destination for domestic and aerospace manufacturing, promote indigenous and modernised technological capabilities, develop world-class manpower and support MSMEs to be globally competitive.

In an attempt to cut red tape and remove procedural hurdles, the defence industry will be declared as essential services under the Maharashtra Essential Services and Maintenance Act.

Chief Minister Devendra Fadnavis, who was accompanied by Defence Minister Manohar Parrikar, said the state government would float a Rs 1,000 crore fund with the involvement of Maharashtra Industrial Development Corporation (MIDC), IDBI, SBI Caps and other financial institutions to provide initial funding to investors. The fund will provide comfort to investors to kickstart their projects considering the defense and aerospace industry is capital intensive.

Parrikar said the Centre would contribute its share to the proposed fund and added the fund would be a game changer for the defence and aerospace industry in Maharashtra.

The policy proposes to leverage Nagpur’s strategic location and its existing maintenance, repair and overhaul (MRO) facility as a global hub for airlines. The government plans to provide VAT incentives on service parts at the Nagpur MRO to make it a preferred  choice for low-cost carriers.

Further, the government will provide need-based support to R&D institutions. Fiscal and non-fiscal incentives will be provided to investors who set up aerospace and defence-related R&D units in the state. Incentives will be provided to units for developing skilled human resources and emphasis will be laid on imparting vocational training.

As far as anchor units are concerned, the state will provide special incentives and other kinds of  support needed. Fadnavis said the policy focussed on MSMEs, which would form a critical supplier base to anchor units. MSMEs will be given incentives for market development, quality certification and patent registration.

The government will support units that collaborate with public sector defence enterprises. The benefits will be applicable to joint ventures too.

Some other incentives include an industrial promotion subsidy; exemptions in the electricity duty, stamp duty, entry tax and local body tax; and VAT and CST waivers.  

All anchor units with investments ranging from Rs 500 crore to Rs 1,000 crore will be allowed to use up to 20 per cent of the designated land for residential and commercial purposes.

Defence and aerospace units will be entitled to relaxations with regard to working hours, shifts and employment of women. These units will be exempted from maintaining records for attendance and salary. They will also enjoy an option for self-certification and filing of consolidated annual returns under 13 laws administered by the labour department.

These units will be entitled to relaxations under the Contract Labour Act applicable to special economic zones. These relaxations will be subject to approval by the state legislature.