DEFENCE FDI 2

Later, DIPP Secretary R P Singh said increasing the FDI
to 49 per cent would not make much difference as there would
not be extra benefits to investors.
Asked whether other ministries had been taken on board,
Singh said they would also respond as it was only a discussion
paper. "We have to complete the inter-ministerial discussions,
and after that we will take further steps depending upon what
kind of consensus emerges," he said.
In a bid to give some comfort to domestic players, the
paper suggested that there need not be any commitment on
procurement from these foreign-controlled entities.
"It is not at all necessary for us to underwrite the
production. The FDI policy will not interfere with the
prerogative of armed forces to chose an equipment of their
choice... (global defence firms too) will have to participate
in the Request for Proposal to technically qualify and also
compete in the financial bid," it said.
The paper said: "The defence equipment (in the country)
available today is of old vintage and needs replacement. Only
15 per cent of the equipment can be described as state-of-the-
art and nearly 50 per cent faces obsolescence."
India opened up the defence equipment industry to private
sector in May 2001, but restricted foreign participation to 26
per cent in this capital intensive sector.
India at present imports over USD 8 billion worth of
defence equipment and its defence budget is growing at 13.4
per cent annually since 2006-07.
For the current fiscal, the defence budget is pegged at
USD 31.9 billion and the government has set a target of 70 per
cent indigenisation of defence production to enable transfer
of new technology to the domestic industry.
Industrial houses Tatas, Mahindras and L&T are among the
big domestic players in the defence sector. MORE PTI