Foreign direct investment (FDI) in defence will come steadily as the proposals in the sector has to go through different layers of negotiations, Commerce and Industry Minister Nirmala Sitharaman said on Wednesday. During January-December 2015, India had received only $0.08 million FDI in defence industries despite the government relaxing the policy for the sector.
“I am sure, defence will also see healthy FDI. In defence, negotiations take longer. Naturally it is going to take longer because the technical details are far far complex and the layers of officials who deals with it…So it has to pass through entire layers,” she told reporters here.
She also said that concerns were expressed when the government relaxed the FDI policy in defence. It has now done away with the approval of Cabinet Committee on Security. She added the proposals needs to go through different layers “because you need that due diligence”. When asked about the issue of licensing in the small arms manufacturing, Sitharaman said FDI policy simplification does not mean that the commerce ministry wants to take away the power of the concerned ministries.
“When you are talking about licensing for small arms still being with the Home Ministry, our objective was not to remove it from them…that is not the intention of the DIPP,” she said the DIPP would not interfere there because the act which governs a sector is monitored by the respective ministry. Recently, FDI limit for defence sector has also been made applicable to manufacturing of small arms and ammunitions covered under the Arms Act 1959.
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Talking about FDI in private security agencies, she said any security agency will have to obtain its license and that lies in the domain of the Home Ministry. The compliance as regards establishing a security agency will have to be done as per the Private Security Agencies Regulation Act, 2005.
When asked about the issue that FDI up to 74 per cent in private security agencies has created a piquant situation as the Act governing the sector stipulates that the majority stake in such companies should be held by an Indian, she said: “as long as the law is there, we have to abide by that…the concerned ministry (i.e Home Ministry) has to look at that”. In 2015-16, FDI in the country grew by 29 per cent to $40 billion.