Cautioning against raising the 26% cap in foreign direct investment in defence, a industry body, Ficci, on Monday said a decision on this ?will require careful thinking and analysis?.
Amit Mitra, secretary general, Ficci, in a conference said, ?The 26% FDI cap in the defence sector has already attracted top overseas defence original equipment manufacturers (OEMs) like BAe, EADS, Sikorsky and Lockheed Martin, to hugely invest in the country?s defence sector. Therefore, any increase in FDI cap in the sector will require careful thinking and analysis.?
Responding to a query, Mitra pointed out that ?countries like Germany, China, South Korea and Canada have recently revised their FDI policies in defence?post September 11, 2001 (9/11)?making the policies much more stringent. They have inducted methodologies to punitively scrutinise FDI inflows in this sensitive and strategic sector?.
?Therefore,? he said that ?there should be significant involvement of OEMs in the defence sector at the existing 26% FDI cap?.
The industry body has suggested 49% FDI cap can only be considered on the basis few conditions including– a higher FDI should be clearly linked with the full platforms being produced and has to be a minimum capitalization of $100 million; The proprietary technology content being inducted in the JV is that what is sought by the country and will form the basis of further indigenous technological development; JV provides an undertaking to source between 50% to 70% of their components/ subsystems by value, indigenously, by nurturing Tierised Indian vendor industries; export obligation of ten times the equity must be committed by the OEM within ten years of entering into the contract; the technology received, once cleared by the home country government, should have no restrictions on its global exploitations.
Also, post the transfer no retrospective law should be applicable to restrict the technology exploitation. All these should be in writing from by the home country government of the OEM / defence major. (Since there are dual use technology restrictions and a technology denial regime in many developed countries).