Economy

No headway on FDI in defence production proposal

PTI | Updated on May 26, 2011

New Delhi, May 26 A year after the Industry Ministry put out a discussion paper on increasing foreign direct investment in defence production to 74 per cent, it has not been able make a concrete proposal for the Cabinet.

“Defence is a strategic subject. There have been brainstorming sessions. There has been no formal proposal which has been moved,” Commerce and Industry Minister Mr Anand Sharma told PTI. At present, foreign direct investment (FDI) up to 26 per cent is allowed in defence production.

Senior Ministers including Finance Minister Mr Pranab Mukherjee, Home Minister Mr P Chidambaram, Defence Minister Mr A K Antony and Mr Sharma have been meeting over the issue, but no consensus seems to have emerged on increasing the FDI ceiling in the sensitive sector, sources said.

They said the Defence Ministry has reservations on hiking the overseas investment in the sector, whereas according to the Industry Ministry’s argument, the government would have a stricter control over the production of arms and ammunition if they are manufactured in the country by foreign vendors.

Government being the main buyer of the Defence equipment resorts to large-scale imports from manufacturers in different parts of the world and it has little or no access to the technology or production facilities.

It was in this context that the Department of Industrial Policy and Promotion (DIPP) had gone to the extent of suggesting 100 per cent FDI in the sector.

According to the discussion paper, defence equipment in the country is of old vintage and needs replacement. Only 15 per cent of the equipment can be described as state-of-the-art and nearly 50 per cent faces obsolescence.

The capital expenditure for the Defence has been pegged at Rs 69,198 crore of which a large part is spent on imported equipment and arms.

Published on May 26, 2011

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