The government today said it was weighing the pros and cons of raising the foreign direct investment (FDI) limit in defence production, with a long-term objective of making India a major player in the sector.
Confirming “there are discussions” in this regard, Commerce and Industry Minister Anand Sharma said at an Assocham function that the government was looking at the “long-term interest in ensuring that India has technologies” and became a major manufacturing place (for defence).
He said before a decision was taken, the “sensitivities” of the defence establishment would be taken on board.
Different ministries, including the Ministry of Defence and the Ministry of Finance, the Department of Industrial Policy and Promotion, as also the Planning Commission, are debating the issue.
India permits 26 per cent FDI in defence manufacturing, an area of growing interest for the domestic private sector, which is demanding 100 per cent FDI.
Major industrial houses like Larsen and Toubro, the Tata group, mahindra & Mahindra and Punj Lloyd are already engaged into different defence-related businesses.
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Of the total defence allocations of Rs 1,47,344 crore for 2010-11, a large chunk, of Rs 60,000 crore, has been earmarked for capital expenditure.
While the country has a large domestic defence manufacturing base, mainly in the government sector, the government sources equipment worth Rs 30,000-35,000 crore for the world’s second-largest, 1.5-million strong, force.