Centre for 74 pc FDI in defence

Centre for 74 pc FDI in defence

Move aimed at speedy upgradation of weapons

Centre for 74 pc FDI in defence

The Department of Industrial Policy & Promotion (DIPP), in a  discussion paper, vouched for higher inflow of FDI into defence sector saying urgent upgrade of equipment in the armed forces was needed as a bulk of them suffered from obsolescence.

Recently CII study had shown Indian industry is vehemently opposed to 100 per cent FDI in this strategic segment having a bearing on country’s security.

Soliciting comments on the proposal, the Centre, said the hike in FDI need not mean any commitment on procuring from companies, which have set up facilities in India. “These players will have to participate in Request for Proposal to technically qualify and also compete in financial bid,” it said.

The paper noted only 15 per cent of India’s defence equipment can be described as state-of-the-art and nearly 50 per cent is suffering obsolescence.

It said the general perception is that present FDI cap of 26 per cent discourages original equipment manufacturers (OEMs) from bringing in proprietary technology, as OEMs are reluctant to license their proprietary technology to a company in which their equity is restricted to a minority of 26 per cent.

Stating significant advantages to be gained from raising the FDI cap in defence, it said, this could provide significant incentive for transfer of know-how and technology, leading to higher levels of technological expertise. The paper argued that higher FDI limit would also provide significant incentive for transfer of know-how and technology. This, in turn, would assist in achieving government’s objective of 70 per cent indigenisation through encouraging transfer of new and state of the art technologies to Indian defence industry, as also through the absorption of latest technologies, thereby promoting self reliance.

Positive posture

* FDI limit in defence proposed to be raised from 26 to 74 per cent
* This will facilitate quick transfer of technology for defence equipments
* India Inc is oppsed to 100 pc FDI in defence
* Nearly half of country’s defence equipments are obsolete
* Only 15 per cent are state of the art