Sharma asks Antony to consider hiking FDI cap in defence

Commerce and Industry Minister Anand Sharma has asked his Defence counterpart A K Antony to consider the proposal of hiking FDI cap in the defence sector to 49 per cent.

In a letter to Antony late last month, "Sharma has requested the Defence Minister to consider the proposal of the Department of Industrial Policy and Promotion (DIPP) to raise the FDI cap to 49 per cent" a source said.

Currently, foreign direct investment (FDI) upto 26 per cent is permitted in the defence sector.

"The DIPP is eagerly awaiting Antony's response," the source added.

The move assumes significance after Prime Minister Manmohan Singh recently indicated that the government would further liberalise FDI regime in the coming months and push the land reforms measures.

Sharma has pitched for raising the FDI ceiling to at least 49 per cent to make India a major defence equipment player.

"I am in favour of raising FDI in the defence sector to at least 49 per cent, not 74 per cent," Sharma had said.

The DIPP, under Sharma's charge, in a May 2010 discussion paper had said that for the country to have state-of-the-art technology, will "..have to permit anything above 50 per cent, if not 100 per cent." It had even said that 100 per cent FDI would be desirable.

India opened up the defence equipment industry to private sector in May 2001, but restricted foreign participation to 26 per cent in this capital-intensive sector.

India is one of the largest defence importers in the world with a minuscule component of exports.

India at present imports over USD 8 billion worth of defence equipment and its defence budget is growing at an average of 13.4 per cent annually since 2006-07.

The defence budget for the current fiscal is Rs 2.03 lakh crore, up 14 per cent over the revised estimate of 1.78 lakh crore for 2012-13.