Govt notifies hike in FDI cap to 49% in defence sector

Written by fe Bureau | New Delhi | Updated: Aug 27 2014, 06:49am hrs
The government on Tuesday notified the hike in foreign investment limit in defence production to 49% from 26% approved by the cabinet recently. It said even beyond the new limit of 49%, foreign investment would be considered on case to case basis by the Cabinet Committee on Security (CCS) provided it was prima facie felt that such investments would lead to technology assimilation by the Indian industry.

The department of industrial policy and promotion has clarified that in case of proposal for FDI above 49%, the CCS would be the only screening agency even if the funds involved are in excess of R1,200 crore which in normal case needs to be vetted by the Cabinet Committee on Economic Affairs.

As per Tuesday's notification, 49% foreign investment will be permitted in the defence sector through the FIPB route. The investments include FDI, FIIs, foreign portfolio investors, NRIs, foreign venture capital investors and qualified foreign investors (QFIs). However, portfolio investments by FPIs/FIIs/NRIs/QFIs and investments by FVCIs together will not exceed 24% of the total equity of the investee/joint venture company. Portfolio investments will be under automatic route. The other conditions include management of the applicant companies being in Indian hands with majority representation of the Board as well as CEOs of the company/partnership firm being resident Indians. The objective is to boost domestic defence industry.