The Foreign Investment Promotion Board (FIPB) has rejected a proposal from German firm EADS Deutschland GmbH and Larsen & Toubro (L&T) for setting up a joint venture company for manufacturing, distribution and marketing of products pertaining to electronic warfare, military avionics, radars and defence-related mobile systems. This was done after taking up the matter in six of its previous meetings
FIPB rejected the proposal on recommendations from the Ministry of Defence (MoD). The defence ministry did not support it on the ground that the proposal was not in conformity with the sectoral cap of 26 per cent FDI in the defence sector. In its comments to FIPB, MoD is believed to have said that the foreign partner (EADS Deutschland GmbH) would be bringing in bargaining power, technology and investments and it would not be easy for the Indian partner (L&T) to carry forth its views in the day-to-day functioning of the company.
EADS Deutschland GmbH and L&T had sought FIPB approval in their manufacturing joint venture for bringing in 24.5 per cent foreign equity, amounting to Rs 6.12 crore, by EADS Deutschland GmbH (within the 26 per cent FDI allowed in the defence sector), while 51 per cent equity would be held by L&T Technology. The remaining 24.5 per cent equity would be held by L&T Ltd.