NEW DELHI: After a series of steps to ease foreign direct investment (FDI) rules, the government has decided not to immediately push for liberal norms for overseas flows into defence production.
"The issue has been discussed and the defence ministry has some concerns. We will wait until the defence ministry agrees to it," commerce and industry minister Anand Sharma told TOI in an interview on Saturday.
In a discussion paper released over a year ago, the department of industrial policy and promotion had proposed that the FDI cap in defence be increased from 26% to 74% to promote local manufacturing instead of depending on imports. The paper had said that this would help India achieve 70% indigenization, which is in line with the government's policy intent, instead of the current situation where local procurement adds up to just around 30%.
"The issue has been discussed and the defence ministry has some concerns. We will wait until the defence ministry agrees to it," commerce and industry minister Anand Sharma told TOI in an interview on Saturday.
In a discussion paper released over a year ago, the department of industrial policy and promotion had proposed that the FDI cap in defence be increased from 26% to 74% to promote local manufacturing instead of depending on imports. The paper had said that this would help India achieve 70% indigenization, which is in line with the government's policy intent, instead of the current situation where local procurement adds up to just around 30%.
Industry department is of the view that encouraging local manufacturing would help save foreign exchange since the defence forces in any case relied on foreign players, with no presence in India, to buy equipment. Besides , local presence is expected to result in lower influence of arms dealers.
Defence minister A K Antony has, however, blocked any move to allow higher foreign investment in the sector on the grounds that it is of strategic interest. In fact, till a few months ago, the industry department was even complaining of local players setting up 100% Indian ventures finding it tough to get a go-ahead . Defence is one of the few sectors in which industrial licence is still required.
Surprisingly, Antony has received partial support from industry chambers which are against allowing more than 49% FDI in the defence sector. Sharma indicated that there was no rush to increase the cap as 100% local investment by the private sector was allowed and suggested that the industry would look at ways to leverage the current policy and also make a case for a higher foreign investment ceiling in the sector.
Although industry chambers have supported higher FDI in defence production, even they have suggested safeguards given the sensitivities . For instance, in its feedback to the government, Ficci has suggested that FDI in a venture should be capped at 49% apart from recommending a minimum capital requirement of $100 million (around Rs 550 crore). CII too was for a maximum FDI cap of 49%, with control in the hands of the Indian partner.
The issue has been discussed and the defence ministry has some concerns. We will wait until defence ministry agrees to it, says commerce and industry minister Anand Sharma, adding that there is no rush as 100% local investment by the private sector is allowed The department of industrial policy and promotion had proposed that the FDI cap in defence be increased from 26% to 74% to promote local manufacturing instead of depending on imports Ficci and CII have opposed more than 49% FDI in defence.
Defence minister A K Antony has, however, blocked any move to allow higher foreign investment in the sector on the grounds that it is of strategic interest. In fact, till a few months ago, the industry department was even complaining of local players setting up 100% Indian ventures finding it tough to get a go-ahead . Defence is one of the few sectors in which industrial licence is still required.
Surprisingly, Antony has received partial support from industry chambers which are against allowing more than 49% FDI in the defence sector. Sharma indicated that there was no rush to increase the cap as 100% local investment by the private sector was allowed and suggested that the industry would look at ways to leverage the current policy and also make a case for a higher foreign investment ceiling in the sector.
Although industry chambers have supported higher FDI in defence production, even they have suggested safeguards given the sensitivities . For instance, in its feedback to the government, Ficci has suggested that FDI in a venture should be capped at 49% apart from recommending a minimum capital requirement of $100 million (around Rs 550 crore). CII too was for a maximum FDI cap of 49%, with control in the hands of the Indian partner.
The issue has been discussed and the defence ministry has some concerns. We will wait until defence ministry agrees to it, says commerce and industry minister Anand Sharma, adding that there is no rush as 100% local investment by the private sector is allowed The department of industrial policy and promotion had proposed that the FDI cap in defence be increased from 26% to 74% to promote local manufacturing instead of depending on imports Ficci and CII have opposed more than 49% FDI in defence.
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