Clearing the air on allowing 100 per cent foreign capital in the defence sector among international defence firms present in large numbers at the 11th edition of Aero India, Minister of Defence Manohar Parrikar said the government will allow 100 per cent foreign capital only when the investing company proposes to produce a product in which the country does not possess expertise.

“We are not going to allow FDI in the sector irrationally. We will do it rationally. Wherever we have competition we will not buy that from outside. Why should I allow 100 per cent foreign investment in a product which we are already making? Why should I give 100 per cent FDI where we are competing? It will be irrational move. But the route is open. I will definitely consider proposals where we do not have expertise. At least under ‘Make in India’ you will get employment, local indegenous development,” Minister of Defence Manohar Parrikar said here Tuesday.

In 2015, the Narendra Modi-led government unveiled a plethora of measures to open up key sectors for greater inflow of foreign equity, including allowing 100 per cent FDI in the defence sector. However, since then not a single proposal has been approved.

French defence major DCNS was the only firm to have made a proposal, which was rejected because the technology it proposed for submarines is already being developed by DRDO.

Navy dumping home-grown Light Combat Aircraft (LCA) Tejas

Last year the Indian Navy rejected one of the government’s most ambitious projects under ‘Make in India.’ According to the Navy Chief Sunil Lanba, the naval variant of LCA-Tejas, developed by DRDO, does not meet its requirements, even as it is planning to procure twin-engine fighter planes for its aircraft carriers from foreign vendors.

“The project is thoroughly supported by the Navy. The LCA expansion does have 25 per cent financial component coming from the Navy, 25 per cent from the Air Force and 50 per cent by HAL … What Navy wants is a different variety and they think that two-engine will be a better version. If we proceed with what Navy wants, then the LCA Navy version will have to be successfully tested, to which the Navy has agreed. Commercial production is a different issue based on actual requirement,” Parrikar said.

Tejas has been under construction for over 30 years now to replace the MiG aircraft of the Indian Air Force. It is a single-engine lightweight multi-role supersonic jet.

Defence innovation fund in the offing

While formally inaugurating the six-day-long Aero India event, Parrikar said the government is on the verge of setting up a defence innovation fund to encourage defence start-ups.

“We are initiating a defence innovation fund with an initial contribution from Hindustan Aeronautics Ltd (HAL) and the Bharat Electronics Ltd (BEL). The fund will support innovation and technology development and will be open to both Indian and foreign firms,” Parrikar said.

He said the focus of this fund would be to support start-ups in the defence sector to enable a culture of innovation.