Defence PSU Bharat Electronics Limited's (BEL) move to forge a joint venture with foreign partners in the area of precision-guidance seekers for missiles have hit an air-pocket with the FDI cap perceived as lower by potential suitors.
The Bangalore-headquartered company has been pursuing nearly a dozen joint venture proposals, majority of them with foreign partners, for some time now but without any headway largely because interested overseas technology firms finding the extent of their equity well short of expectations.
"We have been discussing about 10-12 proposals for joint ventures...One or two in India....Some with foreign companies, especially for sub-sets of things like seekers", BEL Chairman and Managing Director Ashwani Kumar Datt said.
"Basically, seeker is a radar but it's a miniature type of radar which will guide the missiles. For that, we are in discussions with both European as well as Israeli companies for setting up a joint venture," he said.
"Of course, while some discussions have taken place in terms of technical inputs, financial issues are still there to be resolved primarily on account of that foreign direct investment which is allowed being shorter than what they (potential joint venture partners) expect", Datt said.
In the defence sector in India, the upper limit prescribed for foreign companies to invest in joint ventures is 26 per cent.
Early this month, the government rejected a proposed joint venture between Larsen and Toubro and Franco-German aerospace and defence group EADS, in the area of electronic warfare systems, avionics and radars, as it would exceed the caps on foreign investment.
Echoing the view of industry bodies and foreign companies, the pre-budget economic survey this year suggested that foreign direct investment (FDI) limit in defence industries be raised to 49 per cent from 26 per cent and allowed up to 100 per cent on a case to case basis, in high technology, strategic defence goods, services and systems that can help eliminate import dependence.
Datt said BEL is keen to forge joint ventures in the areas such as missiles, electro-optics and "portions of radars like radars for civilian areas".
BEL is ready to work with potential partners either through a joint venture or some sort of arrangement like long-term partnership (not called a joint venture).
"Hopefully, some of these joint ventures should come through," he said.
