Antony opposes proposed hike in FDI in defence

Discussion in 'Economy & Infrastructure' started by Ray, Jul 4, 2013.

  1. Ray

    Ray The Chairman Defence Professionals Moderator

    Apr 17, 2009
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    Antony opposes proposed hike in FDI in defence

    NEW DELHI: Defence minister AK Antony has opposed moves to raise the FDI in defence manufacturing from 26 per cent to 49 per cent, saying that it will affect growth of domestic industry, officials said Wednesday.

    Antony has written a letter to commerce minister Anand Sharma saying that his ministry was of the view that the FDI in defence manufacturing sector should stay at 26 per cent, they said.

    The defence minister, who has consistently pitched for growth of domestic defence industry, said that allowing foreign companies to set up manufacturing facilities will hamper growth of indigenous research and design development, they said.

    Sources said Antony also stated that the FDI cap should not be raised as the country cannot be dependent on foreign companies or policies of countries of their origin in defence sector on a long-term basis.

    However, he added that permission for the FDI beyond 26 per cent can be given on a case-to-case basis if it would lead to access to modern technology. He said such clearance can be given by the cabinet committee on security.

    The sources said a committee headed by economic affairs secretary Arvind Mayaram had recommended that the FDI limit be raised to 49 per cent in several sectors through automatic route.

    The committee had suggested that the FDI in defence be raised to 49 per cent under the government approval route from 26 per cent at present.

    Antony opposes proposed hike in FDI in defence - The Times of India


    Anand Sharma is very keen to hobnob with foreigners who smell of cash.

    Money and not the Nation seems to spur him into an erotical frenzy.

    He was also one of those great advocates of colluding with Abu Dhabi over the Jet Etihad deal which would not bring FDI but ensure cash strapped Indian money flows into Abu Dhabi.

    It was the good old Subramanian Swamy who put the spanner in the works and gave Manmohan the cold feet!

    And now he is doing a somersault in ecstasy over the most lucrative realm of them all - defence!!

    Antony is correct in being cautious.

    Yes, FDI should be flexible, if only state of art technology comes into India and not say, producing Tatra like trucks!

    Such FDI should remain at the levels accepted so far!
    TrueSpirit likes this.
  3. TrueSpirit

    TrueSpirit Senior Member Senior Member

    Jun 17, 2009
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    Forget It....Trace my IP if you can
    Here's a paper that argues in favour of 100% FDI in Defence.

    At a very high level, here's what it argues:

    Since 2001, India has allowed FDI up to 26 per cent in its defence industry. However, the policy has so far had a modest impact in terms of meagre financial ($0.15 million till May 2010) as well as technological inflows as evident from the absence of any meaningful partnership between Indian and foreign companies. The major factor responsible for such a limited impact is the lack of incentives offered to foreign investors by the current policy.

    To overcome the constraints inherent in existing policy, suggestions have been made to increase the FDI cap although differences exist with respect to the precise level of the higher cap. The Indian industry’s suggestion that the cap be increased to a maximum of 49 per cent with certain conditions - especially the mandatory capitalisation of $100 million- is not likely to incentivise the foreign companies; and even if it does, it would at best help a handful of big Indian companies, while the small and medium sized companies would be effectively debarred from taking advantage of the FDI route due to limited equity.

    Considering India’s underdeveloped defence R&D and production base, the desire to enhance domestic defence production and the immense economic benefits that could flow in, an increase in the FDI cap would improve the prospects of technology transfer and the forging of meaningful ties between Indian and foreign defence companies.

    Increasing the FDI cap is also likely to facilitate the effective functioning of the offset policy as well as the “Buy and Make (Indian)” procurement provision. Keeping the above potential benefits in mind, the FDI cap in the defence sector could be increased to 100 per cent, instead of fixing it at a level of up to 74 per cent (as suggested by some) because a cap-based approach is marked by constraints, especially in terms of attracting high technology-intensive investments.

    At the same time, given the sensitivity attached to the defence industry and national security, all defence-related FDI could be subject to a wider review by the empowered Foreign Investment Promotion Board. The FIPB may be empowered to recommend the precise level of FDI varying between zero and 100 per cent, based on a thorough investigation and detailed impact analysis of each investment. The agency may also be empowered to recommend additional security measures to investors in order to mitigate any concern that may arise during the course of the investigation. To ensure that FDI leads to an enhancement of India’s technological base, the empowered FIPB may also mandate technology transfer to Indian companies and their value addition as a precondition for allowing external investment.

    From our limited experience so far, FDI has only proved to be good for the sectors it has been allowed in, but only if the cap is a substantial limit.

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