Defence minister A.K. Antony on Wednesday opposed the proposal of the department of industrial policy and promotion (DIPP) — that functions under the purview of the commerce and industries minister — to hike the Foreign Direct Investment (FDI) ceiling in the defence sector from the current 26 percent to 49 per cent, saying the FDI cap should remain at 26 per cent. However, Mr Antony said that if FDI beyond 26 per cent in any specific case “is likely to result in access to modern and state-of-the-art technology into the country”, a decision can be taken to allow higher FDI beyond 26 per cent on a case to case basis by the Cabinet Committee on Security (CCS).
In a letter written to commerce minister Anand Sharma, Mr Antony made it clear that “... allowing foreign companies to set up manufacturing (or) assembly facilities here (in India) will be a retrograde step as it will stymie the growth of indigenous design and development and (that) our (India’s) dependence on foreign countries and original equipment manufacturers for modern weapons will get perpetuated ...”.
“The deliberated view of the ministry of defence (MoD) therefore remains that the FDI cap in the defence manufacturing sector should remain at 26 per cent,” Mr Antony wrote.
The defence minister pointed out that India, in the long term, cannot be dependent on foreign companies in the defence sector and “vulnerable to policies of their countries of origin” and that therefore, the effort is to “build up indigenous capability” by “encouraging companies to get into design and development of modern weapon systems”.
Mr Antony also said the MoD is actively encouraging the involvement of the (Indian) private sector in defence.