The Government is inclined to allow an increase in Foreign Direct Investment (FDI) limit beyond the existing 26 per cent in the defence sector on a case-to-case basis.
The Government, however, has reiterated its view that ideally the limit should be only 26 per cent as Defence is a strategic sector.
The views of the Government have been brought out in the Report of the Department related Parliamentary Standing Committee on Defence on ‘Indigenisation of Defence Production-Public Private Partnership which was laid in Parliament. The Chairman of the 31-member committee is Mr Satpal Maharaj and its members include the former Prime Minister, Mr H.D. Deve Gowda.
The Parliamentary Committee has expressed the view that the possibility of increasing the FDI limit to 49 per cent in the sector should be examined by the Government after keeping in mind the fact that national interest must reign supreme in Defence-related matters. The Committee report points out that it has given due weight to the benefits that would accrue to the industry and economy as a result of the increased inflow of FDI,
The industry, including the representatives of the Federation of Indian Chambers of Commerce and Industry and the Associated Chambers of Commerce of India, had expressed the view that the present limit of 26 per cent FDI in the sector needed to be enhanced to attract foreign investors.
The Ministry of Defence, however, holds the view that any increase in the FDI level beyond 50 per cent would imply management control with foreign investors and such ventures might fail to deliver at critical junctures due to factors such as sanctions imposed by foreign Governments, among others.
Currently, private sector firms including Mahindra and Mahindra, the Tatas and Samtel are participating in the Defence projects.
