49 percent FDI in defence sector on need basis: AntonySeptember 20th, 2008 - 5:53 pm ICT by IANS
New Delhi, Sep 20 (IANS) After doing away with the license requirement for private players for manufacturing military hardware, Defence Minister A.K. Antony Saturday said the government would consider foreign investment of upto 49 percent in the sector on a “case-to-case-basis”.”We will stick to the policy of allowing 26 percent FDI (foreign direct investment) in the Indian defence sector. We will consider allowing 49 percent FDI only on a case-to-case basis, if the industry is able to convince us (about the need for this),” Antony told a seminar here on Defence Procurement Policy.
Antony also reiterated the government’s commitment to transparency in the procurement process and to removing the “veil of secrecy” surrounding it.
“We believe in open deals. There will be no more veil of secrecy in the Request for Proposals (RFPs). Details would be made available to all industry representatives by placing the tenders on the net, except in the most sensitive cases, which is a minuscule number,” he said.
“Earlier, only a select few companies got the RFP. But with the implementation of the new Defence Procurement Procedure-2008, we will ensure everyone gets the tender details. In this way, we ensure transparency and also widen the vendor base,” Antony said.
The DPP-2008, released in June this year, did away with the license requirement for industries for manufacturing military hardware, thereby creating a “level playing field” with the defence public sector undertakings.
“This DPP is revolutionary. We are doing away with the licence raj. Till now the industries had to get licence from the defence ministry and department of industrial production. Now, they don’t need a licence from us. This will create a level playing field,” Antony had said while releasing the DPP-2008.
In May 2001, the government had permitted 100 percent private participation in defence production, as also Foreign Direct Investment of up to 26 percent of the host company’s equity. However, private firms could produce military item only after obtaining a licence from the defence ministry.
In 2006, the ministry came out with the concept of Raksha Udyog Ratnas (private industry leaders) to treat well-performing companies on par with defence public sector undertakings such as Hindustan Aeronautics Limited, Bharat Electronics, Bharat Earth Movers Limited, Bharat Dynamics, Goa Shipyard and Mazagon Docks.
The RUR status would give these companies better access to foreign technologies and to substantial government investment of up to 80 percent for design, development and manufacture of defence products, including fighter aircraft, tanks and warships.
Despite several promises the RUR status was never awarded to any company. With the removal of the licensing criteria for the private sector, the concept has become redundant.