The Ministry of Defence sees a “conflict of interest” in the 100 per cent foreign direct investment (FDI) proposal of French firm DCNS even as the company plans to bring in foreign equity into the country for introducing new submarine technology and establish a fully-owned subsidiary.

Under the proposal, which had been deferred by the Foreign Investment Promotion Board, DCNS said it plans to develop a technology used for submarines – Air Independent Propulsion or AIP – that enables them to stay underwater for a longer period without coming out for charging batteries.

‘Not new tech’

However, according to highly placed sources in the Defence Ministry, the government does not consider AIP to be a new technology.

This is because, officials said, the company is already using this technology in collaboration with Defence Research Development Organisation (DRDO) in developing the Scorpene-class submarines with Mazagon Dock Ltd (MDL).

“The FDI policy in defence clearly states that 100 per cent will be allowed only when a firm is bringing in modern technology — something that has not been used before. This is already been developed with DRDO. There is a clear conflict of interest here,” a top Defence Ministry official told BuisnessLine, requesting anonymity.

The FIPB has already deferred the proposal in June, asking the company to furnish more details on the technology.

But the Ministry seems to have applied its brakes on the proposal, saying that this is not a new technology.

The DRDO-developed AIP will be fitted into the last two of the six Scorpene P-75 submarines being built under technology transfer at MDL for the Indian Navy.