French firm DCNS’ plan for 100% FDI stuck despite easing of norms in defence

Nayanima Basu New Delhi | Updated on January 17, 2018

Defence collaboration A file picture of the submarine Kalvari at the Mazagon Dock in Mumbai. The submarine is being built under transfer of technology from DCNS PAUL NORONHA

The proposal was the first since the sector was opened up

A proposal to inject 100 per cent foreign equity into the country by French firm DCNS, for introducing new submarine technology and establishing a wholly-owned Indian subsidiary, has hit a roadblock.

This is despite the government’s recent move to relax foreign direct investment (FDI) norms in defence sector.

The proposal was deferred by the Foreign Investment Promotion Board (FIPB) under the Ministry of Finance in its last meeting in June. The FIPB is the final approving authority on FDI proposals.

Ironically, it was in June that the government took a slew of measures to ease FDI norms in several sectors. In defence, particularly, it did away with the old clause of ‘state of art technology’ and replaced it with ‘modern technology’ for allowing 100 per cent foreign capital.

In March, DCNS had sought approval “to set up a company in India (IndiaCo) for conducting the business of undertaking design and industrialisation studies, research and development activities and manufacturing and maintenance in relation to air independent propulsion systems for submarines, the FIPB said.

But the proposal got deferred within three months of application due to procedural issues, as the company failed to provide adequate paperwork to make its case, sources told BusinessLine.

Sources said FIPB had also asked DCNS to further explain the technology, also known as Air Independent Propulsion or AIP. Such a system is used in submarines and enables them to stay underwater for a longer period. This is an essential system for warships of all kinds. For Indian submarines, this technology is of critical importance. It basically allows the traditional diesel-electric submarines to remain underwater for a longer period without the need to surface often for recharging the batteries, which can be risky during war.

It is learnt that the French firm has already responded to FIPB with additional information and that the proposal might be considered in its upcoming meeting on July 12, sources said. However, DCNS declined to comment on the issue.

DCNS, one of the global leaders in submarine systems, has been involved with the Indian Navy since the mid-1980s when it first participated to the preliminary design phase of the first Indigenous Aircraft Carrier, now being built at Cochin shipyard.

It is also assisting Mazagon Dock Ltd in Mumbai to build six Scorpene-class P75 submarines for the Indian Navy under transfer of technology assistance.

Published on July 07, 2016

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