The draft policy has also mooted sops for fresh investments or expansion of existing units in the aerospace and defence sector in Bengaluru as well, people privy to the discussions told ET.
All recent policies of the state offered incentives and concessions for investments only in regions outside of Bengaluru. The change in stance shows that the government wants to include the country’s technology capital as well for incentives, as it is home to a vibrant defence and aerospace manufacturing ecosystem and a 1,200-acre cluster is taking shape near the Kempe Gowda international airport.
The industries department has finalised the draft in consultation with other departments and has sought the Cabinet’s approval.
Karnataka makes up 40% of India’s defence electronics systems and products, industries minister Murugesh R Nirani said. “Our incentive package will give further boost to the sector,” he told ET, and added the state had targeted $6 billion in investments over the next five years.
The new policy will recognise the changing dynamics in the sector and align itself with the Aatmanirbhar programme and with the emerging global trends. Apart from the IT/BPO sector, Bengaluru has cemented its position as India’s largest aerospace cluster, after the government set up
in 1940, and is pursuing ambitions to become Asia’s aerospace hub.
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At the Aero India show in Bengaluru last year, the state government signed 34 memorandums of understanding with aerospace and defence firms.
The government, Nirani said, would build Bengaluru, Belagavi, Mysuru, Tumakuru and Chamarajanagara as aerospace and defence hubs over the next five years.
“We believe Karnataka is poised to retain its leadership in aerospace design & manufacturing,” said Aravind Melligeri, chairman at Aequs, a large manufacturer of aerospace components in India. “While incentives are one thing, the bigger challenge would be to continue developing manufacturing clusters and making sure industries get technically skilled workforce in design and manufacturing locally. That will fuel investments and add jobs.”
Aequs operates out of the Belagavi aerospace cluster, India’s first special economic zone for aerospace manufacturing, operated by Aequs Infra.
Karnataka’s new policy will emerge at a time when the Centre is building defence industrial corridors in Uttar Pradesh and Tamil Nadu. The state’s policy will have four chief focus areas: end assembly, aerospace & defence-related electronics; maintenance, repair and overhaul; and additive manufacturing.
The policy will offer a huge land and financial incentive packages for space, defence and aerospace manufacturers and their sub-sectors, the minister said.
The electronics system design and manufacturing (ESDM) policy, for instance, offers investors a capital subsidy of 25% on land and 20% on plant and machinery, apart from a 1% production-linked incentive (PLI) and other sops, including waiver of electricity duty and concessional power tariff. The aerospace & defence policy will have similar sops, but numbers may vary, officials privy to the discussions said.
