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FDI in Defence Sector leaves a positive impact

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New Delhi. 29 July 2016. It was about a month and a half ago when the government’s decision to open up the defence sector to allow foreign companies to own as much as 100% equity in the local defence sector through the government approval route in cases where it is likely to result in access to modern technology, and the indigenous industry is wondering whether Make in India is still the Mantra?

“Foreign investment beyond 49% has now been permitted through government approval route, in cases resulting in access to modern technology in the country or for other reasons to be recorded. The condition of access to ‘state-of-art’ technology in the country has been done away with.The FDI limit for the defence sector has also been made applicable to manufacturing of small arms and ammunition covered under Arms Act 1959,” said the official defence ministry statement.

Till now foreign OEMs (original equipment manufacturers) were required to form joint ventures with domestic firms if they wanted to establish a manufacturing base in India. With this amendment, an OEM can independently plan and implement operations in India.

The total Foreign Direct Investment (FDI) made in the country during each of the last three years and the current year shows a raise which is optimistic.

S. NO. FINANCIAL YEAR (In US$ million)

FDI IN FLOW

 

  1. 2013-14 36,046
  2. 2014-15 45,148
  3. 2015-16 55,457
  4. 2016-17 (Upto May 2016)   7,456

List of FDI proposals received in Foreign Investment Promotion Board (FIPB) under defence sector during the last three years and the current year are as under:-

Year 2013:  08 proposals:

Sl. No. Name of the company Country Action taken

 

  1. M/s Mahindra & Mahindra Limited USA Approved
  2. M/s Bharat Electronics Limited France Approved
  3. M/s Amertec Systems Pvt. Ltd. Israel Approved
  4. M/s Pipavav Defence and Offshore Engineering Company Ltd. Mauritius Approved
  5. M/s NSE Industries France Approved
  6. M/s Maini Precision Products Pvt. Ltd. Mauritius Approved
  7. M/s Indian Rotorcraft Limited Netherlands Approved
  8. M/s BF Elbit Advanced Systems Pvt. Ltd. NRIs FII Approved

 

Year 2014:  10 proposals:

Sl. No. Name of the company Country Action taken

 

  1. M/s Sasmos Het Technologies Ltd., Bangalore Netherlands Approved
  2. M/s Quest Global Manufacturing Private Limited, Bengaluru. Mauritius Approved
  3. M/s Samtel Thales Avionics Limited France Approved
  4. M/s Verdant Telemetry & Antenna Systems Pvt. Ltd. FII / NRI Approved
  5. M/s Maini Precision Products Private Limited. Mauritius Approved
  6. M/s Bharti Shipyard Ltd. FII / NRI Approved
  7. M/s Solar Industries India Limited, Nagpur. FII / NRI Approved
  8. M/s Idea Forge Technology Pvt. Ltd. FII / NRI Approved
  9. M/s Punj Lloyd Limited. USA Approved
10. M/s Thales India Pvt. Ltd. Hong Kong Approved

 

Year 2015:  10 proposals:

Sl. No. Name of the company Country Action taken

 

  1. M/s Dynamatic Technologies Ltd. NRI / FII Approved
  2. M/s Mahindra Telephonic Integrated Systems Limited. USA Approved
  3. M/s Indian Rotorcraft Limited. Netherland Approved
  4. M/s BF Elbit Advanced Systems Pvt. Ltd. Israel Approved
  5. M/s Safran Engineering Services India Pvt. Ltd. France Approved
  6. M/s Fokker Elino B.V. Netherlands Netherlands Automatic Route
  7. M/s Menon Bearings Limited Not mentioned Rejected
  8. M/s Sikorsky Aircraft Corporation United States Does not lie
  9. M/s Verint India Systems Pvt. Ltd. United Kingdoms Rejected
10. M/s Rolta Meprolight Private Limited India Withdrawn

 

Year 2016:  04 proposals:

Sl. No. Name of the company Country Action taken

 

  1. M/s Tata Sikorsky Aerospace Limited Singapore Approved
  2. M/s Indian Rotorcraft Limited India Deferred
  3. M/s  DCNS France Deferred
  4. M/s Quantum Technologies LLC. United Kingdom Approved

 

The Government, recently, vide Press Note No.5 (2016 series) dated 24.06.2016 inter-alia reviewed the FDI Policy in Defence Sector.  Foreign Investment up to 49% is allowed through automatic route and above 49% under Government route wherever it is likely to result in access to modern technology or for other reasons to be recorded.  The foreign investment in defence sector is further subject to industrial license under the Industries (Development & Regulation) Act, 1951.

The amendments made in the policy could be the most trusted route to technology transfer which would help in increasing the defence production base and providing the much needed impetus to self-reliance and indigenization in defence sector.

Foreign investment above 49% is permitted in cases wherever the proposal is likely to result in access to modern technology or for other reasons to be recorded.  Such proposals are considered by Foreign Investment Promotion Board (FIPB) based on the security clearance of Ministry of Home Affairs (MHA) and comments of Ministry of Defence.  Foreign investment in Defence sector is subject to the grant of Industrial License under the Industries (Development and Regulation) Act 1951, by Licensing Committee, an inter-ministerial body, which among other things, also takes into account security clearance by Ministry of Home Affairs (MHA) and views of Ministry of Defence (MoD).

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