Defence minister hints at increased FDI levels for defence
18 Apr 2007
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Bangalore: Defence minister AK Anthony said Saturday that the country's defence sector, so far the exclusive preserve of public sector units, is now open to increased foreign direct investment (FDI) in order to hasten domestic production of military equipment and armaments.
"There was a time when only defence establishments were allowed to produce all the military equipment required by the armed forces. There was no FDI... not even a role for the private sector. That scenario has changed now. We have allowed FDI to an extent of 26 per cent in defence production. We are also permitting joint ventures between defence establishments and international suppliers. This process will intensify and we are open to higher FDI step by step," Anthony told reporters here.
The minister, who was on a visit to the Hindustan Aeronautics Ltd establishment here, pointed out that the offset clause in defence purchases was at 30 per cent. As per this clause, foreign contracts worth Rs300 crore or more would require the vendor to plough back 30 per cent of the contract value in offsets, or production in India, that is directly related to that contract.
"Since the procurement has increased, the sky is the limit for the defence establishments. They should absorb the complete 30 per cent by upgrading and improving their R&D, HR skills and by forging joint ventures. Many foreign companies have evinced interest in forming alliances with Indian firms," he added.
"There was a time when only defence establishments were allowed to produce all the military equipment required by the armed forces. There was no FDI... not even a role for the private sector. That scenario has changed now. We have allowed FDI to an extent of 26 per cent in defence production. We are also permitting joint ventures between defence establishments and international suppliers. This process will intensify and we are open to higher FDI step by step," Anthony told reporters here.
The minister, who was on a visit to the Hindustan Aeronautics Ltd establishment here, pointed out that the offset clause in defence purchases was at 30 per cent. As per this clause, foreign contracts worth Rs300 crore or more would require the vendor to plough back 30 per cent of the contract value in offsets, or production in India, that is directly related to that contract.
"Since the procurement has increased, the sky is the limit for the defence establishments. They should absorb the complete 30 per cent by upgrading and improving their R&D, HR skills and by forging joint ventures. Many foreign companies have evinced interest in forming alliances with Indian firms," he added.
