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India Inc yet to warm up to defence FDI

Last Updated 21 December 2014, 19:53 IST

Six months after the NDA government came to power, one of its big ticket agendas to spur the manufacturing growth by hiking the foreign direct investment in defence has received a lukewarm response from the industry.

Since June, 2014, the foreign investment promotion board got only six proposals from Indian firms willing to form a joint venture with a foreign partner. Out of the six, only in two cases the proposed investment is 49 per cent, the minister of state in the defence ministry Rao Inderjit Singh informed the Rajya Sabha last week.

Punj Lloyd is the only big name, while others are not well known and may not have the capability to set up large scale manufacturing units. One company, Solar Industries Ltd, Nagpur proposed an FDI of only 1.18 per cent. Other foreign fund seekers are Hats Off Helicopters Training Ltd, Bangalore; Ideaforge Technology, Ltd; Aequs Ltd and Fokker Elmo Sasmos Interconnection Systems Ltd.

Within days of coming into power, Narendra Modi-led government circulated a 15-page cabinet note suggesting a road map of increasing the FDI in defence from the existing level of 26 per cent to 49 per cent and even to 100 per cent in some cases after obtaining necessary approvals.

Referring to his budget speech, then defence minister Arun Jaitley who also held the finance portfolio informed the Parliament in July that the composite cap of foreign exchange was being revised to 49 per cent with full Indian management and control through FIPB route for defence sector. The security concerns are being taken care of.

A month later Jaitley told the Parliament that details and conditions of the policy announced in the Union Budget 2014-15 were being worked out and were yet to be notified.

Meanwhile, the defence ministry has procurement worth Rs 1.2 trillion since June, though several of those approvals have to be vetted by the finance ministry and the Cabinet Committee on Security.

The defence sector was opened for FDI (26 per cent) in 2001. Since then, 33 joint ventures were approved to manufacture various equipment and the total FDI flow was Rs 24.36 crore.

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(Published 21 December 2014, 19:52 IST)

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