Defence production may be thrown open to private sector
New Delhi: In a significant policy development, the government is proposing to dereserve defence production and open it for private participation through the licensing route. A cabinet note to this effect is now being prepared with the concurrence of the defence ministry

Under the proposed licensing norms, companies seeking entry into defence production would need a minimum capital of Rs 100 crore. Foreign investments will be permitted but capped at 26 per cent. In case of joint ventures, the licensing conditions will prescribe that the foreign joint venture partners must seek clearance from their respective governments.

Prospective companies will also have to make a commitment of making available spares for a period of at least 20 years. This stipulation is being made to cover for imported components considering that defence manufacture is hi-tech and new players are likely to bring in cutting edge technologies.

Currently, manufacture of arms and ammunition, along with allied items of defence equipment - including defence aircraft and warships - is reserved exclusively for the public sector, which includes the 39 state-owned ordnance factories, eight defence PSUs and over 40 defence research and development laboratories.
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