JOIN USAnticipating a change of guard at the Centre, the Federation of Indian Chambers of Commerce and Industry (Ficci) has pitched in with a request to the government to have a relook at the foreign investment policy in the defence sector as the existing norms have “serious implications” on the “conglomerates in the defence business.”
“I request you to kindly revisit and reconsider the policy governing the defence sector in consolidated FDI policy circular of 2004,” A Didar Singh, secretary general of Ficci wrote in a letter to Department of Industrial Policy and Promotion secretary Amitabh Kant.
At present, the government allows 26 per cent foreign direct investment after approval by the foreign investment promotion board. All proposals beyond 26 per cent FDI have to be cleared by the Cabinet Committee on Security on a case-to-case basis.
The Ficci argued that a blanket ban on investment by foreign portfolio investors (FDIs/FIIs) in listed Indian conglomerates, where defence business is just one of the business verticals, would not be practical in the current corporate as well as regulatory structure. “Such restrictions on FII/FPI flow may lead to increase in imports of defence hardware and go against the strategy of attaining substantive self reliance. “FII share does not cede control to foreign investor. It is totally different from FDI, which gives certain control to investor. The capping condition is not practical for listed companies,” he said.
The fresh move comes almost 10 months after Defence Minister A K Antony rejected such a proposal from Commerce Minister Anand Sharma and Finance Minister P Chidambaram.