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Our Bureau

New Delhi, Nov. 6 The Foreign Investment Promotion Board has recommended that a decision be deferred on EADS and Larsen and Toubro’s proposal to form two joint ventures for production of defence equipment and services here.

This is the third time that a decision on the project has been deferred.

While FIPB has recommended the deferment, the Finance Minister is yet to take a final view. Sources indicated that the decision has been deferred as sections in the Government wanted more time to examine the proposal, specially to verify that the ‘control and ownership’ of L&T in both the joint ventures is ‘absolute and complete’.

The Ministry of Defence was also of the view that allowing the proposal to go through in its current form could lead to a situation where the current 26 per cent cap of foreign direct investment allowed in the sector could be breached.

“Allowing the proposal to go through in its current form opens the possibility of having foreign equity in defence sector up to 49.49 per cent which would breach the existing cap,” sources said.

EADS and Larsen & Toubro wanted to form two joint ventures to carry out the business of providing design, engineering and product development services and manufacturing, distribution and marketing of products in the electronic warfare, military avionics, defence related mobile systems and radars.

The proposal sought approval to incorporate a joint venture with a foreign equity of 24.5 per cent amounting to Rs 6.12 crore.

According to the proposal EADS will hold 24.5 per cent stake in the manufacturing joint venture. While 51 per cent will be held by L&T Technologies, the balance 24.5 per cent, sources said, is proposed to be held by the services joint venture where L&T would hold majority 51 per cent stake and the foreign collaborator will hold 49 per cent.

More Stories on : Alliances & Joint Ventures | Policy | Larsen & Toubro Ltd

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