Indian Government To Encourage Greater Foreign Participation In Defense Sector

Indian Government To Encourage Greater Foreign Participation In Defense Sector

Indian television news channel 'Times Now' reports that the Government Government is now proposing a Foreign Direct Investment (FDI) of 50 per cent in defence PSU's. Since 2002, a FDI cap of 26% was in place for defence sector.

The new proposal suggests that foreign investors can buy a stake of 50 per cent in defence PSU's involved in manufacturing. This could give them a controlling stake in the PSU. FIPB approval, however, is mandatory for the sector. In 2001, the Government had opened the defence sector to private participation, but the FDI in the private sector has been capped at 26 per cent.

What this means is that public sector companies like Hindustan Aeronautics, which manufactures indigenous defence aircraft like the flight trainer Kiran, could be on the block. Also on the block for foreign investment could be defence PSU's like Bharat Dynamics -- manufactures of the Agni and Prithvi missiles, BEML -- manufacturer of the trucks and launch vehicles used for various missile systems and Bharat Electronics Limited (BEL), manufacturers of electronic warfare equipment and surveillance radars.

Defence analyst Retd Air Comodore Jasjit Singh spoke to TIMES NOW on the issue and said, "Opening the defence sector to FDI will lead to infusion of new technology and investment in the Indian aviation industry." Big name companies like Lockheed Martin and Boeing have shown wide interest in investing in India's defence sectors. At a recent air show, Boeing and Lockheed Martin had showcased their products like the F-16 aircraft.

In the atomic sector, the Government has recently declassified the mineral Limonite as an atomic Mineral. Limonite is used in production of titanium alloys used in the aircraft industry and Titanium used for manufacturing of paints. Based on these recommendations, 100 per cent FDI will be allowed in mining of Limonite and production of Titanium. Mining of minerals classified as atomic minerals are governed by the Regulations set in place in 1998 and have not been allowed.

It is interesting to note that India has 30 per cent of the world's Limonite’s reserves. These proposals put forward by the Commerce Ministry to the Cabinet Committee on Economic Affairs (CCEA) and are likely to find several detractors as defence and atomic sectors are considered as sensitive sectors and a symbol of India's national pride.