100 per cent FDI in defence sector: Industry poised for quantum leap

Discussion in 'Indian Air Force' started by WolfPack86, Jun 22, 2016.

  1. WolfPack86

    WolfPack86 Senior Member Senior Member

    Oct 20, 2015
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    The government has now introduced new procurement rules that are expected to simplify procedures.
    India's defence industry, held under leash for long because of a conservative approach that blocked the private business to flourish in the sector, is poised for a quantum leap as the government allowed 100 per cent foreign direct investment further easing approvals for big-ticket projects.

    But the industry viewed the fresh move with caution as 100 percent FDI was already allowed in the defence sector with a rider that it would consider cases that brought in "state-of-the-art technology" to the country.
    The government has now said that it will consider cases which brought "modern technology" to the country. The Modi government has been in favour of allowing massive private participation in the defence sector.

    Defence minister Manohar Parrikar has gone on record to state that the government would not mind giving 100 per cent FDI in a venture that would make manufacturing fighter planes in India possible.

    But many experts felt that it would still be difficult to define what comprises modern technology which is a broad criteria covering everything under the sun.

    Despite a liberal regime, foreign investments in the defence sector have been sluggish.

    According to government figures foreign investments worth only a crore of rupees were made in last two years in the defence sector.

    The situation is expected to change dramatically in the coming years as the government has introduced new procurement rules that are expected to simplify procedures.

    The officials said the actual FDI flows will be reflected in the coming months.

    There have been some bigticket investments. Just a day ago, India's Tata Advanced Systems (TASL) announced foundation of a new facility in Hyderabad for manufacturing Boeing AH-64 Apache helicopter fuselages.

    The IAF is buying 15 Apache helicopters but the facility will be used to meet international demands as Boeing has customers for the heavy lift helicopters in 15 other countries.

    Parrikar said it is the largest defence FDI joint venture in the country.

    The UPA government was reluctant to open up the defence sector as it allowed only 26 per cent FDI through automatic route.

    Despite several recommendations from the commerce ministry the cap was not raised until the Modi government brought it up to 49 per cent soon after coming to power.

    The industry had always pressed to go beyond 49 per cent as they said that what mattered was having larger control of the business in India.

    The officials claimed that by including "modern technology" as a criteria for allowing 100 percent FDI, it would open up larger participation.

    The Modi government wants to build a credible military industrial zone in the country where the country can emerge as an exporter of military hardware.


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