Defence minster AK Antony has rejected a proposal to increase foreign direct investment in the defence sector. Replying to commence and industry minister Anand Sharma’s proposal to raise the FDI limit in the defence sector to 74 per cent from the 26 per cent, Antony maintained that the move would stymie the growth of the domestic industry.
In an official communication to the commerce minister, Antony said, “In the field of defence, we can not afford to be dependent on foreign companies and vulnerable to policies of their countries of the origin.”
The defence minister added that “We are importing weapon systems for our immediately requirements and till we develop our own systems. Allowing foreign companies to set up their manufacturing facility here will be a retrograde step as it will stymie the growth of indigenous design and development — and our dependence on foreign countries will get perpetuated.” At present, India imports around 70% of its defence equipment.
However, he also has made it clear that wherever FDI beyond 26 per cent is likely to result in access to state-of-the-art technology into the country, decisions can be made to allow higher FDI on a case-to-case basis with the approval of the cabinet committee on security.
“The deliberated view of the defence ministry, therefore, remains that the FDI cap in the defence manufacturing sector should remain at 26 per cent,” he wrote.
The commerce ministry wants global majors in the defence sector to join hands with both PSUs as well as private sector units to produce weapons in India. Anand Sharma has been trying hard for an increase in the FDI limit for the defence sector to 74 per cent from the current 26 per cent, while the four-member committee headed by economic affair secretary Arvind Mayaram has proposed increasing the limit to 49 per cent.
The department of industrial policy and promotion (DIPP) has suggested that the FDI limit be raised to 74% and the proposal is under consideration of the government.