Home ministry raises concerns over FDI hike in sensitive sectors

The home ministry has raised serious concerns over the proposal to hike FDI cap in defence, space, telecom and a few other areas, citing security issues arising from fund flows from countries like China in these sectors, the PTI reports.

The department of industrial policy and promotion (DIPP) conveyed this to the home ministry and it was all set to dash off another letter conveying its strong opposition to any such move which might harm the security of the  country, the  report said.

According to the home ministry, FDI exceeding a certain limit in defence, space, telecom, information and broadcasting, civil aviation from countries like China, Pakistan, Bangladesh, Saudi Arabia and Indonesia might allow these countries to dictate terms which could hurt India's interests.

It sais this was a serious issue and it had already conveyed its view to DIPP and would soon write another letter explaining the reasons behind its opposition in hiking the FDI cap in these key sectors, according to a home ministry official.

FDI in these sectors needed mandatory security clearance from the home ministry and the recommendation of a committee to raise FDI limit to 49 per cent in almost all sectors through automatic route had also been opposed by the home ministry saying safeguards must be put in place while allowing hike in FDI in key sectors. The committee, headed by economic affairs secretary Arvind Mayaram, had recommended hiking of FDI limit to 49 per cent in almost all sectors through automatic route.

Meanwhile, the government was planning to work its way around defence minister A K Antony's refusal to increase the foreign direct investment cap in the sector by allowing up to 49 per cent FDI on a case-to-case basis and up to 26 per cent on more relaxed terms, though after FIPB clearance, Kolkata-based The Telegraph reported.

The report said that India had at least two defence deals where Hindustan Aeronautics (HAL) was in a 50:50 joint venture with Russian firms. HAL, in December 2006, signed a deal with Russia's Irkut Corporation to develop and make a 60-tonne multi-role transport aircraft. While HAL in association with Ilyushin Design Bureau designed the aircraft, it manufactured the aircraft in Kanpur with Irkut.

Another 50: 50 deal was signed by HAL in December 2010 with Russia's Rosoboronexport to build a stealth fifth-generation fighter jet equipped with Indian weapons such as the Astra missile. The two joint ventures got clearance as  they had been cleared by cabinet committees and seen as vital to the country's defence.