The Hindu : National : Government may allow 49 % FDI in defence sector: Antony

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Government may allow 49 % FDI in defence sector: Antony

Sandeep Dikshit

NEW DELHI: In a major ray of hope for foreign armaments manufacturers, Defence Minister A. K. Antony has said the government would consider allowing 49 per cent foreign direct investment (FDI) in the defence sector on a “selective basis.”

Many foreign defence companies have expanded their presence in the country but claim that their business plans are hamstrung due to the 26 per cent cap on FDI. Speaking to The Hindu, several foreign companies including BAE Systems and Thales have said their business plans necessitate at least 49 per cent stake in joint ventures with Indian companies. Although these companies were earlier happy to sell defence equipment with minimal Indian input, their plans went awry after the government began insisting on 30 to 50 per cent offsets.

“We will stick to the policy of allowing 26 per cent FDI in Indian defence sector. We will consider allowing 49 per cent FDI only on a case-to-case basis, if the industry is able to convince us,” Mr. Antony said at a seminar on defence procurement organised by the Associated Chambers of Commerce and Industry (Assocham) here on Saturday.

The Minister said foreign companies should have no cause for compliant because the offset policy had been rationalised according to their suggestions. Under the offset policy, companies selling big ticket defence platforms must generate a certain percentage of the value of the contract from India.

“The offset policy which I understand is of considerable interest to the Indian defence industry has been rationalised to meet their much needed demand to include offset credit banking which will enable foreign participants to create offset programmes in anticipation of future obligations. In order to further streamline and simplify the process for a domestic firm to participate in such offsets, mandatory requirement of an industrial licence has been relaxed so that all they now need to do is to meet the relevant guidelines specified by the government. All this will encourage foreign firms to enter into long term relationships with their Indian industry partners.”

Transparency

Mr. Antony also assured that there would not be opaqueness surrounding the selection of companies during the tendering process. “We believe in open deals. There will be no more veil of secrecy in the Request for Proposals (RFP). Details would be made available to all industry representatives by placing the tenders on the net, except in the most sensitive cases, which is a minuscule number,” he observed.

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