India to raise 26 percent cap in defence FDI

April 23rd, 2008 - 8:50 pm ICT by admin  

A file-photo of Manmohan Singh

New Delhi, April 23 (IANS) India will raise the 26 percent cap on foreign direct investment (FDI) in the defence manufacturing sector to enable the co-development with Russia of a multi-role transport aircraft (MRTA), parliament was informed Wednesday. “There is a proposal to relax foreign direct investment cap of 26 percent to facilitate co-development of a multi-role transport aircraft,” Minister of State for Defence Rao Inderjit Singh said in a written reply in the Rajya Sabha.

“The matter is under process to get approval of the competent authority,” he added.

India and Russia had in November 2007 inked a $600 million deal to jointly develop and produce the MRTA for their air forces and for sale to third countries.

The agreement was among the four signed in Moscow after Indian Prime Minister Manmohan Singh held talks with Russian President Vladimir Putin.

The two countries in October 2007 signed an agreement on jointly developing and producing a fifth generation combat jet after Defence Minister A.K. Antony’s talks in Moscow with his Russian counterpart Anatoly Serdyukov.

The MRTA project had been fine-tuned during Antony’s visit.

India’s Hindustan Aeronautics Limited (HAL) and Russian Rosoboronexport will form a 50:50 joint venture to produce the aircraft.

In real terms, however, Russia will not put any money in the project since its share will be met from the debt owed to it by India, defence ministry sources here said.

“It is estimated that development and certification of the MRTA will take six years or less,” the sources said.

“The envisaged requirement is for 100 aircraft for the Russian Air Force, 45 for the Indian Air Force (IAF) and a projected demand of 60 from third countries,” the sources added.

This will make the MRTA the first aircraft to be exported from India. The two countries are also hoping to market in third countries the BrahMos supersonic cruise missile they are jointly producing in India.

With a payload of 15-20 tonnes, the new aircraft will perform multifarious roles like transporting cargo and troops, parachute dropping of soldiers, air ambulance casualty evacuation and air dropping of supplies.

The MRTA will also function as a mid-air refuelling tanker and can be modified to carry up to 100 passengers.

The IAF sees the MRTA as a replacement for its ageing fleet of 60-70 Soviet-era An-32 aircraft. Some 240 An-32s are currently flying around the world.

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