Antony shoots down higher FDI in defence production sector
Posted: Fri May 21, 2010 7:47 pm
Source: http://timesofindia.indiatimes.com/Indi ... 955034.cms
The logic seems slightly skewed. For a country which imports 70% of its military hardware and software spending billions of dollars every year, India still remains reluctant to lift the 26% foreign direct investment cap in the defence production sector.
But the Indian defence establishment remains unconvinced. Defence minister A K Antony on Thursday once again shot down suggestions for raising the FDI limit in the defence production sector, holding that "26% is enough at the moment''.
This comes after the commerce ministry's Department of Industrial Promotion and Policy earlier this week proposed the FDI limit be hiked to as much as 74%. Similar recommendations have come from other quarters. Last year's Economic Survey, for instance, proposed the FDI limit be raised to 49%, with even 100% being allowed in a case-by-case basis.
"Let them (the commerce ministry) discuss. The policy is still evolving... But at the moment, we feel the Indian defence sector is not ready to absorb more FDI,'' said Antony, who often points to "sensitivities involved'' in the defence sector.
Yes, defence is a strategic sector. But it's equally true that India desperately needs a robust defence-industrial base if it's to fulfil its aspirations of becoming a global superpower.
"We are forced to import even basic stuff like bullet-proof jackets, ballistic helmets, assault rifles, artillery shells and the like. FDI can be kept out of areas which are really sensitive,'' said a senior officer.
The overwhelming dependence on imports, which can be stifled in times of crisis, leaves India quite vulnerable. MoD's two-step forward, one-step backward policy in the defence production sector -- still largely the public sector's preserve -- over the last decade has not helped matters.
It has neither managed to enthuse the domestic private sector to jump into the sector in a major way, except for some players like Tatas, Mahindra, Punj Lloyd and L&T, nor led to any major FDI inflow.
"Greater FDI will usher in top-notch technology, quality and management skills, as also lower prices and more competition. A defence-industrial base, even with higher FDI, will be far better than being so dependent on imports,'' said an official.
It was in May 2001 that the government opened up the defence sector to 100% for the Indian private sector, with FDI permissible up to 26%, both of course subject to licensing.
Till date, just about 130 private sector companies have been issued letters of intent or manufacturing licences, with a bulk of them yet to fructify on the ground.
Similarly, India has attracted FDI worth just a few hundred crores in defence till now. This when, just between 2004 and 2009, it spend Rs 1,37,496 crore on capital acquisitions, the majority of them from abroad.
The logic seems slightly skewed. For a country which imports 70% of its military hardware and software spending billions of dollars every year, India still remains reluctant to lift the 26% foreign direct investment cap in the defence production sector.
But the Indian defence establishment remains unconvinced. Defence minister A K Antony on Thursday once again shot down suggestions for raising the FDI limit in the defence production sector, holding that "26% is enough at the moment''.
This comes after the commerce ministry's Department of Industrial Promotion and Policy earlier this week proposed the FDI limit be hiked to as much as 74%. Similar recommendations have come from other quarters. Last year's Economic Survey, for instance, proposed the FDI limit be raised to 49%, with even 100% being allowed in a case-by-case basis.
"Let them (the commerce ministry) discuss. The policy is still evolving... But at the moment, we feel the Indian defence sector is not ready to absorb more FDI,'' said Antony, who often points to "sensitivities involved'' in the defence sector.
Yes, defence is a strategic sector. But it's equally true that India desperately needs a robust defence-industrial base if it's to fulfil its aspirations of becoming a global superpower.
"We are forced to import even basic stuff like bullet-proof jackets, ballistic helmets, assault rifles, artillery shells and the like. FDI can be kept out of areas which are really sensitive,'' said a senior officer.
The overwhelming dependence on imports, which can be stifled in times of crisis, leaves India quite vulnerable. MoD's two-step forward, one-step backward policy in the defence production sector -- still largely the public sector's preserve -- over the last decade has not helped matters.
It has neither managed to enthuse the domestic private sector to jump into the sector in a major way, except for some players like Tatas, Mahindra, Punj Lloyd and L&T, nor led to any major FDI inflow.
"Greater FDI will usher in top-notch technology, quality and management skills, as also lower prices and more competition. A defence-industrial base, even with higher FDI, will be far better than being so dependent on imports,'' said an official.
It was in May 2001 that the government opened up the defence sector to 100% for the Indian private sector, with FDI permissible up to 26%, both of course subject to licensing.
Till date, just about 130 private sector companies have been issued letters of intent or manufacturing licences, with a bulk of them yet to fructify on the ground.
Similarly, India has attracted FDI worth just a few hundred crores in defence till now. This when, just between 2004 and 2009, it spend Rs 1,37,496 crore on capital acquisitions, the majority of them from abroad.