Govt may open special window to bring 49% FDI in defence

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New Delhi, Oct 6: is a major in mission critical information systems for the defence, aerospace and security markets. But this is seen as a JV in the IT sector, though India Inc is pitching for the same argument in the defence-manufacturing sector.

Rahul Chaudhry, CEO of Tata Power (strategic electronics division), said, “Defence is one sector where the government is ‘the’ market and unless the government wants private sector in it, it will be difficult for the private sector to enter.”

A Ficci official said on condition of anonymity said there were examples where public sector companies were given orders through the nomination process. “This makes foreign companies to go in for tie-ups with public sector companies as they feel they would get more orders through them than through private sector companies.”

“The government should have a long-term vision that to be a superpower and for the security of the country, India should stop being an importer of technology and ensure that it uses the country’s intellectual capability and home-grown companies in the defence sector,” Chaudhry said.

The defence sector, that has been dominated by the public sector, was liberalised in May 2001 to allow 100% private investment, but only 26% FDI.

Claiming that the government is fully committed to the development of a vibrant and proactive defence industry in the country, defence minister A K Antony had said last month that if the industry is able to convince the government, it (the government) would consider allowing 49% FDI on a case-to-case basis.

Antony had also said barring some sensitive cases, the new defence procurement policy would be transparent as it would ensure that both the private and public sector gets the details of all tenders.

Noting that the country’s defence sector was worth about $ 5-8 billion annually, industry body Assocham last month had also mooted raising the FDI cap in defence from 26% to 49% to speed up the defence indigenisation process and enable latest technological transfer to the domestic defence sector.

Assocham said the country’s expenditure on arms imports since 1999 Kargil conflict had jumped to $25 billion and is expected to rise to $ 30 billion by 2012.