Indian Military

Six major western industry associations have written to the Indian Ministry of Defense asking for measures to ease their prospects for commerce in defense equipment. They say in their letter, “The current offset policies have effectively hindered our member companies’ ability to play a full role in supporting India’s defense, security and economic needs,” adding that, “These and other challenges presented by the current offset policy have often precluded our member companies from responding to a Request for Proposal. Our member companies have lost out on potential programs, while the MoD (Ministry of Defense) may not be able to benefit from the best technology solution at the best price.”

The letter was jointly written by the ADS (Aerospace, Defense and Security), a British association of defense and aerospace companies, AIA (Aerospace Industries Association), a US body, AIAC (Aerospace Industries Association of Canada), BDLI (Bundesverband der Deutschen Luft und Raumfahrtindustrie -German Aerospace Industries Association), GIFAS (Groupement des Industries Fran̤aises A̩ronautiques et Spatiales РGrouping of French Aerospace Industries) and USIBC (US India Business Council) and addressed to Defense Minister Arackaparambil Kurian Antony, Minister of State for Defense Mallipudi Mangapati Pallam Raju, Defense Secretary Pradeep Kumar, Secretary for Defense Production Raj Kumar Singh.

The Federation of Indian Chambers of Commerce and Industry (FICCI) has published a paper in response to the solicitation of views by the Department of Industrial Policy and Promotion (DIPP), arguing for conditional increase, if at all, in the limits to investment by foreign players in Indian defense industry beyond the current limit of 26 per cent, to 49 per cent. The DIPP, in its discussion paper, was considering hiking FDI limit up to 74 per cent, and even 100 per cent in some cases.

The Indian Ministry of Commerce allowed the participation of the private sector in the defense industry in May 2001, permitting 100 per cent equity with a maximum of 26 per cent of FDI, subject to licensing. Under the Defense Procurement Procedure (DPP) 2008, limit was raised to 49 per cent FDI on a case-by-case basis. But the Foreign Investment Promotion Board (FIPB) has not, so far, approved the formation of a venture with a 49 per cent FDI component.

FICCI sees little reason to permit FDI above 26 per cent, considering the existing FDI into the Indian defense sector, saying in a statement, “The 26% FDI cap in the defense sector has already attracted top overseas defense OEMs like BAe, EADS, Sikorsky, Lockheed Martin, Electtronica Defence Systems, etc to hugely invest in India’s defense sector.