Initiating exercise to raise FDI in defence sector to 100%

Discussion in 'Politics & Society' started by Neil, May 29, 2014.

  1. Neil

    Neil Senior Member Senior Member

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    Sitharaman’s first act: Initiating exercise to raise FDI in defence sector to 100%


    New Delhi: In a major policy initiative, the government is proposing to raise FDI in defence sector to 100 percent through the approval route.

    "The Commerce and Industry ministry has circulated a Cabinet note for inter-ministerial consultation," sources told PTI.

    The proposal to raise FDI cap in defence from 26 percent to 100 percent is aimed at giving a boost to the manufacturing activities.

    As per the 15-page Cabinet note, which was circulated today, portfolio investors, including FIIs, would be permitted to invest only up to 49 percent.

    Further, the note said that a foreign company can even take over a domestic entity provided it brings in state-of-the art technology.

    This is the first major initiative of the ministry after new Commerce and Industry minister Nirmala Sitharaman took charge this week.

    Sources said that permitting FDI in the sector "will hugely help in reducing import bill for defence equipment, will help in boosting manufacturing and creating jobs".

    The UPA government had pegged FDI in the defence sector at 26 percent but allowed Cabinet Committee on Security (CCS) to approve proposals entailing higher investments.

    In May 2010, DIPP had rolled out a discussion paper suggesting increase in FDI cap for the defence sector.

    India opened up the defence equipment industry to private sector in May 2001, but restricted foreign participation to 26 percent in this capital-intensive and sensitive sector.

    India is one of the largest defence importers in the world with a minuscule component of exports.

    It ranks among the top ten countries in the world in terms of military expenditure. India at present imports over $8 billion worth of defence equipment and its defence budget is growing at an average of 13.4 percent annually since 2006-07.

    "The bulk of the domestic production is met either through the Ordnance Factories or the Defence PSUs. Even when defence products are manufactured domestically, there is a large component of imported sub-systems," DIPP had said.

    PTI

    Sitharaman's first act: Initiating exercise to raise FDI in defence sector to 100%

    finally..!!
     
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  3. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    Govt moves to hike defence FDI up to 100%

    Govt moves to hike defence FDI up to 100% - The Times of India

    TNN | May 30, 2014, 02.32 AM IST

    NEW DELHI: Within two days of taking charge, the Narendra Modi government has begun work on allowing up to 100% foreign investment in defence production, in a bid to send a strong signal to global investors as well as to try and move the production base of some equipment into the country.

    The commerce and industry ministry has circulated a Cabinet note seeking comments from other government agencies, sources familiar with the development told TOI.

    The ministry is also readying other proposals to allow FDI in sectors such as railways, where the list of areas where investment will be allowed is being expanded, according to sources. Earlier, the government had planned to allow FDI in high-speed train systems, suburban corridors, high-speed tracks and freight lines connecting ports and mines. Similarly, there is a proposal to ease FDI norms in construction.

    On Tuesday, Arun Jaitley had spoken of the government's intent to hike the FDI cap in the sector to 100% from 26% at present — a move that has been resisted by the defence ministry for years.

    READ ALSO: 6 top priorities for the ministry of defence

    With Jaitley holding both the finance and defence portfolios, opposition may be muted this time. In any case, during his election campaign Prime Minister Narendra Modi had announced his support for greater private participation in the defence sector.

    The cap on foreign investment will include funds routed through FDI, portfolio flows (FII) and investment by non-resident Indians, said a source, who did not wish to be identified. To ensure security compliance, sources said, all proposals will be routed through the Foreign Investment Promotion Board (FIPB) which has representatives from the home ministry and other security agencies.
    While the UPA government too had said that the FDI cap in defence would be raised there was no actual movement on the ground and the rules remained vague.

    On May 23, TOI had reported that the department of industrial policy and promotion (DIPP) in the commerce & industry ministry is ready with proposals to ease the FDI rules for defence, railways and e-commerce.

    The government is keen to ease foreign investment rules to send a signal to global industry that it is truly open for business now.
     
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  4. Voldemort

    Voldemort Senior Member Senior Member

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    Govt moves to hike defence FDI up to 100%

    NEW DELHI: Within two days of taking charge, the Narendra Modi government has begun work on allowing up to 100% foreign investment in defence production, in a bid to send a strong signal to global investors as well as to try and move the production base of some equipment into the country.The commerce and industry ministry has circulated a Cabinet note seeking comments from other government agencies, sources familiar with the development told TOI.
    The ministry is also readying other proposals to allow FDI in sectors such as railways, where the list of areas where investment will be allowed is being expanded, according to sources. Earlier, the government had planned to allow FDI in high-speed train systems, suburban corridors, high-speed tracks and freight lines connecting ports and mines. Similarly, there is a proposal to ease FDI norms in construction.
    On Tuesday, Arun Jaitley had spoken of the government's intent to hike the FDI cap in the sector to 100% from 26% at present— a move that has been resisted by the defence ministry for years.With Jaitley holding both the finance and defence portfolios, opposition may be muted this time. In any case, during his election campaign Prime Minister Narendra Modi had announced his support for greater private participation in the defence sector.
    The commerce& industry ministry has suggested a graded foreign investment ceiling. It has suggested a cap of 49% FDI for companies that do not transfer technology, while in ventures where the foreign partner is willing to transfer knowhow, the government intends to allow up to 74% FDI, and there will be no cap (100% FDI) for companies engaged in manufacturing state-of-the art equipment and machinery or those undertaking modernization projects.

    The cap on foreign investment will include funds routed through FDI, portfolio flows (FII) and investment by non-resident Indians, said a source, who did not wish to be identified. To ensure security compliance, sources said, all proposals will be routed through the Foreign Investment Promotion Board (FIPB) which has representatives from the home ministry and other security agencies.
    While the UPA government too had said that the FDI cap in defence would be raised there was no actual movement on the ground and the rules remained vague.
    On May 23, TOI had reported that the department of industrial policy and promotion (DIPP) in the commerce& industry ministry is ready with proposals to ease the FDI rules for defence, railways and e-commerce.
    The government is keen to ease foreign investment rules to send a signal to global industry that it is truly open for business now.
     
    Last edited: May 30, 2014
  5. mattster

    mattster Respected Member Senior Member

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    Wow.......now that's what I call a bold move.
     
  6. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    The present cap of 26 per cent in FDI has failed to attract the state of the art
    technology in the defence sector.

    Increase of cap from 26 per cent to 49 per cent will not give any additional say to the foreign investor in the affairs of the company
    as per the provisions of the Company Law.


    Therefore, increasing FDI cap from 26 per cent to 49 per cent as is being advocated by some industries associations will not really help us in getting the best technology partners to invest in India. By merely increasing the limit from 26 per cent to 49 per cent we may be accused by posterity of doing too little and too late.

    Therefore, in case we really want to have the state-of-the-art-technology, we have to permit anything above 50 per cent if not 100 per cent.

    It may be, therefore, desirable to allow either 100 per cent or 74 per cent as in the case of telecom sector.

    Since there is licensing provision also in the defence sector, we can refuse to permit FDI in the sector by refusing the license where the background of the company is suspect.


    Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government
    of India, Foreign Direct Investment (FDI) in Defence Sector (Discussion Paper), Government Of India-Ministry Of Commerce & Industry--Department Of Industrial Policy & Promotion
    DiscussionPapers/DiscussionPapers_17May2010.pdf
     
  7. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    Views of Labour unions, DPSUs, DRDO and Defense parasites :

    = FDI limit should be retained at 26 per cent.

    = FDI could be allowed to a maximum of 49 per cent, subject to certain conditions,
    such as:

    = Minimum financial inflow is $100 million.

    = Compulsory inflow of technology with approval of originating government with
    respect to items to be produced in India and their export to other countries.

    = Compulsory industrial licensing and government approval for the formation of
    such JVs.

    = JVs formed in India with more than 26 per cent foreign equity to be barred from
    participating in “Make” projects.


    Hamare pet Par Lat Mar Maro aur Hamara Captive Defense Force Hamse mat Chhino !
     
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  8. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    The fear of national security being compromised is overhyped since a manufacturing facility of a foreign company within the country, governed by Indian laws, is a much better option than importing complete systems from abroad. The government can exercise greater regulation on foreign companies operating in India than on those operating on foreign soil. Similarly, from the technological and industrial point of view, as pointed out in this Brief later, India lags far behind advanced countries in the ‘technology standing index’. FDI, if channelled properly, could prove to be a catalyst for stimulating India’s overall technological and manufacturing capability. The National Manufacturing Council, a group constituted by the prime minister to look into India’s manufacturing sector, had in fact recommended FDI as one of the tools for facilitating technology transfer and enhancing India’s manufacturing capability in key strategic sectors, including aerospace, shipping, IT and hardware and capital goods.

    A Case for Increasing FDI up to 100 per cent in India’s Defence Industry
    Laxman Kumar Behera

    IDSA Paper
     
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  9. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    Defense industry also has value due to its capability to kick-start spinoffs in civil industries.

    I definitely did not see a reason to import trucks from Tatra while India has a decent auto-industry. I am sure it would raise the confidence even among local manufacturers that govt. will buy their products. This would help in bringing in local investment as well.

    Exciting times ahead!!
     
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  10. TrueSpirit1

    TrueSpirit1 The Nobody Banned

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    These Unions are extremely strong. My friend's father works in OFB Kanpur (about to retire). As per him, OFB's are an impossible mess-like State Power Boards, very tough to privatize them. The Union politicians would oppose it tooth & nail & would go to any extent to scuttle any privatization move. If Modi can improve the OFB's, nothing like that. He would be remembered for it.
     
  11. TrueSpirit1

    TrueSpirit1 The Nobody Banned

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    Guys, invest in BEL, M&M, L&T, Pipavav Defence for starters.
     
  12. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    L&T is awesome in general. They recorded a profit increase of 70% last quarter!!!
     
  13. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    Decks cleared for 100% FDI in defence

    Analysts have welcomed the move, stating that more foreign companies would now be willing to team up with and partner Indian companies

    Decks cleared for 100% FDI in defence

    [​IMG]

    Mumbai: As promised in its manifesto, the new BJP government has started working towards minimising defence imports in the country and encouraging local manufacturing. The Commerce Ministry has cleared the Department of Industrial Policy and Promotion's draft seeking to hike foreign direct investment (FDI) in the Defence sector up to 100 per cent from the current 26 per cent.

    While Nikhil Gandhi, Chairman, Pipavav Defence, said the step was long overdue, analysts have termed it a welcome step, stating that more foreign companies would now be willing to team up with and partner Indian companies.

    Last year alone, India imported nearly $1.9 billion of military equipment from the United States, making it the biggest foreign buyer of US weapons. For four decades, Russia was India's largest arms supplier. The US charged ahead last year displacing Russia with large scale deals, according to the Defence and security analysis group, IHS Jane's.

    LARGEST ARMS IMPORTER

    India is also outpacing other countries. India had overtaken China to become the biggest arms importer in 2010, according to the Stockholm International Peace Research Institute, which monitors global arms trade. Last year, the country imported C-17 Globemaster III and the P-8I multi-mission aircraft, among others.

    Two days after Nirmala Sitharaman took charge as the new commerce and industry minister, the government is sending out clear signals to foreign defence manufacturers, that it is intent to move production of defence equipment to India.
    The former chairman of defence contractor BAE Systems had also said that India's cap of 26 per cent foreign investment had prevented the British multinational defence, security and aerospace company from bringing in its "crown jewels" to India.

    'A GREAT STEP'

    Amber Dubey, India head of aerospace and defence, KPMG, a consultancy firm termed it a great step. "The FDI limit increase to 74/100 per cent has been awaited for several years now. Arms imports worth billions of dollars could have been avoided had this happened earlier.''

    Stating that the FDI reforms would open the floodgates of investment in India's defence industry, he added, "Defence imports would be discouraged and lakhs of direct and indirect jobs would be created."

    Stating that a best-in-class fighter jet could be designed, developed, assembled in and exported from India by 2020, Dubey added that the FDI reforms needed to be accompanied by adequate checks and balances.

    He added that subsidiaries of global defence companies in India should mandatorily have 100 per cent Indian citizens as employees, and that foreign staff may come in as experts and consultants after due security clearance. "No plant and machinery, technology or products should be allowed to be repatriated out of India in case of withdrawal of the foreign company from India," Dubey added.

    MOVE TO CUT IMPORT BILL

    Pipavav's Gandhi noted that unless there was 100 per cent FDI in Defence, foreign companies would not bring in technology. Applauding the government for its efforts, he added that the move would create millions of jobs.

    Other Defence manufacturers have termed it a major policy initiative. They added that permitting FDI in the sector would help in reducing India's huge import bill for defence equipment.

    They added that the country has struggled to create indigenous manufacturing of high tech weapons and has had to rely on costly imports. The earlier 26 per cent cap has already attracted top overseas defense original equipment manufacturers (OEMs) like BAe, EADS, Sikorsky, Lockheed Martin, among others.
     
  14. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    Would this stop DRDO and Defense PSUs like HEL, HAL etc importing all parts, assembling those in India, put a hefty profit on it and then force Indian Armed Forces to buy that touting that to be indigenous.....

    Inki dukaan to band ho Jaigi .... How I have been waiting for this moment .....

    They may be impelled to do something to earn their salary rather than carry out propaganda in thin air ...


    First step - FDI for production of Tatras - straight away ( some ex head of BEML may invest along with Sonia Gandhi and some ex Defence bureaucrats).

    Soon we shall have a joint venture and FDI in production of 155 mm Artillary Guns .... Burraha... Ha Ha Ha ...
     
    Last edited: May 31, 2014
  15. Kaalapani

    Kaalapani Tihar Jail Banned

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    IF we cant develop 155mm on our own then 100% FDI will also cant help India.
     
  16. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    100 per cent FDI will bring in money and technology and manufacture them in India .. just watch and see how Kalyani Baba and TATA start delivering 155 mm Motorised, Towed, Mechanised and SP guns within short span of time...


    D O D Os only exercise monopoly and fart around the labs louder than the bang of 155mm
    BAE Systems - M777 Ultra Light Weight 155mm Field Howitzer may be produced in India itself

     
    Last edited by a moderator: May 10, 2015
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  17. Kaalapani

    Kaalapani Tihar Jail Banned

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    We can develop 155mm guns without FDI .We need a policy to encourage our private players .thatz it.
     
    Last edited by a moderator: May 10, 2015
  18. pmaitra

    pmaitra Moderator Moderator

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    Let me throw some caution in the winds.

    What are the checks and balances? What if private defense corporations turn into something like the military industrial complex in the US, get a stranglehold on the government, and turn India into another warmongering nation like the US? After all, there is a lot of profit to be made in war.
     
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  19. sesha_maruthi27

    sesha_maruthi27 Senior Member Senior Member

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    Sir, the neighborhood in which we are living is such that we must be a war mongering nation. Our neighbors understand only the language of war. Especially pakistan.
     
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  20. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    Where are those Private players ?
    Till DPSU and D O D O s have monopoly, nothing can develop in India ... They did not allow private players to come in fray.....
     
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  21. Bangalorean

    Bangalorean Stars and Ambassadors Stars and Ambassadors

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    Let us get the basics right first, before worrying about becoming a "war mongering nation", which is not likely to happen in our lifetimes, no matter what policies are put in place!!

    We cannot manufacture even basic stuff in our nation, and we want to become a powerful nation! First let us fix that. That itself will take more than a decade. The very mention of DRDO and words like "INSAS" ought to drive anyone into a rage. Kalashnikov developed a rifle in 1940s out of love for mother Russia, and DRDO was not able to replicate it even till the early 2000s, after years of trying!! Mig-21 is a plane that was built for rough-use and can be repaired in the field, and we keep moaning about spare parts!!

    We can start worrying about "military industrial complex in India" and "India becoming a war mongering nation, maybe 20 years down the line. At the moment, this is a welcome move.
     

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