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Indian government looking at increasing FDI in the defence manufacturing sectornews
13 June 2007
New Delhi: Indian television news channel 'Times Now' has filed a report that says that the Government may be considering clearing Foreign Direct Investment (FDI) of 50 per cent in defence public sector units (DPSUs) engaged in manufacturing defence related products. Such an enhancement in stake would allow foreign entities to assume effective control of sensitive organizations.

So far, a cap of 26% has been in place for investment in such organizations and approval from the foreign investment promotion board (FIPB) is mandatory for the sector.

On the face of it, such a move would allow all premier DPSUs, such as Hindustan Aeronautics Ltd, BHEL, BEL, Bharat Dynamics and BEML to land up on the selling block. These organizations are collectively responsible for the production of all of India's most sensitive defence products like fighter aircraft and helicopters (Tejas, Dhruv), missiles (Agni, Prithvi), electronic warfare equipment, such as radars and avionics, as well as ships and submarines.

The report comes even as global defence companies like Lockheed Martin and Boeing are trying to cope with the demands of India's newly instituted 'Offset' policy, which requires that 30% of the value of all defence contracts above Rs300 crore, awarded to foreign companies, will have to be outsourced from Indian concerns in some form or the other, including transfer of technology.

With Indian defence contracts one of the most sought after in the global market, foreign companies have been scouting around in the domestic market for likely firms that they can partner with.

Some recent moves by the government include declassifying the mineral limonite, which is used in the production of titanium alloys used extensively in the aerospace and aviation industry. In this regard it may be mentioned that India has 30 per cent of the world's limonite's reserves.

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Indian government looking at increasing FDI in the defence manufacturing sector