The UP government on Tuesday passed a proposal that significantly increases the maximum limit of capital subsidy that investors looking to invest in the state’s defence sector can avail. The move is to relax rules and further incentivise manufacturers to produce in the state, in line with its target of reaching $1 trillion in terms of GDP.

Earlier, producers willing to invest in the state’s upcoming defence sector could get a capital subsidy of 15%, up to a maximum ₹15 crore in the Bundelkhand region, or 10% or maximum of Rs 10 crore in non-Bundelkhand region. Further, in the MSME sector, defence investment in the non-Bundelkhand region attracted a maximum capital subsidy of 5% or ₹5 crore, and 7.5% or ₹7.5 crore in the Bundelkhand region.

Among multiple amendments made to the Defence and Aerospace Manufacturing Policy of 2018, the cabinet approved a proposal to increase the maximum subsidy an investor can avail to ₹500 crore for all categories. This major relaxation of the policy will incentivise producers to expand their current production and bring in large-ticket investments. The subsidy rates have been rationalised to 7% for enterprises coming up in the non-Bundelkhand region, and 10% for those coming up in Bundelkhand region (to be valued leaving out land cost). However, units will only be given a maximum of ₹50 crore per year as subsidy.

The limits, said additional chief secretary of infrastructure and industrial development, Arvind Kumar, were redesigned after careful comparison with other states as well, so that UP emerges as an attractive destination.

CEO of the UP Expressways and Industrial Development Authority (Upeida) — the nodal agency carrying out the development of the defence industrial corridor in the state — Awanish Awasthi said the amendment in the defence policy is the first of a series of amendments that will take place across multiple sectoral policies, to make them more attractive for investors ahead of the Global Investors Summit that UP plans to hold in January next year, with an aim to rope in Rs 10 lakh crore worth of investment.

Awasthi said the state has received investments worth about ₹3,000 crore in the defence sector, and the relaxations will help it fulfil the target of ₹10,000 crore worth of defence investment.

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