Antony turns down proposal to raise FDI limit in defence

Antony turns down proposal to raise FDI limit in defence

Terms it retrograde,says will impact indigenous design,expose country to risks

The defence ministry has said “no” to the proposal to hike FDI limit in the defence sector,saying it would adversely impact development of indigenous design and development capabilities and expose the country to the risks involved in depending heavily on foreign countries for modern weapons.

In a letter to commerce and industry minister Anand Sharma on July 1,defence minister AK Antony opposed any exercise to raise FDI in the sector and said his ministry’s considered view is that the current 26% cap should be maintained.

“Allowing foreign companies to set up manufacturing/assembly facilities here would be a retrograde step as it will stymie the growth of indigenous design and development,and our dependence on foreign countries and OEMs for modern weapons will get perpetuated,” he wrote in the letter. The ministry’s fresh clarifications came in the wake of reports that government was planning to not only raise FDI cap in defence manufacturing to 49% but also give 100% access to FDI in units set up in Special Economic Zones (SEZ). “We have never considered allowing even domestic defence production units in SEZs,so there is no question of permitting FDI in these specialised zones. In fact,we do not want even the 26% cap to be raised further” senior MoD officials told FE.

In his letter,Antony also said that higher FDI could be considered only in certain cases. “…wherever FDI beyond 26% is likely to result in access to modern and state-of-the-art technology into the country,decisions can be taken to allow higher FDI on a case-to-case basis by the Cabinet Committee on Security.”


The issue of raising FDI cap in the sector has resulted in bitter battle between the defence and commerce ministries with each making claims and counter claims about the proposed government move. Commerce ministry has,in fact,indicated that the exercise to revise FDI cap in various sectors is also looking at raising the limit on defence to 49%. The same,it has said,has also been supported by a high-level panel set up by the fiannce minister under the chairmanship of department of economic affairs secretary Arvind Mayaram.

“In the field of defence,we cannot,over the long term,afford to be dependent on foreign companies and remain vulnerable to policies of their countries of origin. Building up our own indigenous capabilities for designing and developing our weapons systems is vital. Our effort is to build up indigenous capability in this field by encouraging companies to get into design and development of modern weapons systems,” Antony said.

“For this purpose,the ministry has been actively encouraging the involvement of private sector in defence and is importing weapons systems for the immediate requirement of the armed forces,till we develop our own systems.”