Defence Minister A K Antony on Wednesday shot down a proposal from Commerce Minister Anand Sharma to increase foreign direct investment (FDI) in defence, arguing that such a step would be “retrograde” in nature and “stymie” the future growth of home-grown military industry.
“The deliberated view of the Ministry of Defence, therefore, remains that the FDI cap in the defence manufacturing sector should remain at 26 per cent,” Antony wrote responding to a letter from Sharma in which the commerce minister advocated for hiking the FDI ceiling up to 49 per cent.
The defence minister advocated growth of indigenous military-industry complexes in India rather than allowing foreign majors to set up their assembly lines here in partnership with big Indian firms.
“Allowing foreign companies to set up manufacturing / assembly facilities here will be a retrograde step as it will stymie the growth of indigenous design and development. Our dependence on foreign countries and original equipment manufacturers for modern weapons will get perpetuated,” Antony said snubbing his cabinet colleague.
In the wake of AgustaWestland VVIP helicopter and Tatra truck scams, the purchase procedure was overhauled, making it absolutely clear that buying of military hardware from abroad would be the last option.
The services will now have to strive either to make the equipment and systems in India or buy from an Indian firm.
For all defence purchase, there will now be an order of preference, in decreasing order (1) Buy (Indian) (2) Buy and Make (Indian) (3) Make (4) Buy and Make with transfer of technology and (5) Buy (Global). Import will be the last option.
Following changes in defence procurement procedures, arms companies appear to have put pressure on the government for increasing the FDI limit so that setting up of assembly lines in partnership with Indian firms become commercially attractive.