AK Antony wants to stick to 20% FDI policy in defence industry

Defence minister AK Antony today ruled out for now any change in the defence production policy to raise the Foreign Direct Investment (FDI) from existing 26% to 100% as suggested by the commerce ministry recently.

"At the moment it (policy on FDI in Defence) is 26%. Our Defence Production Policy (DPP) is evolving over the years...But at the moment we feel Indian defence sector is not matured enough...not ready to absorb more FDI in defence sector. We feel that time is not right to further expand it," Antony told reporters on the sidelines of the Navy Commanders Conference here.

The defence minister said initially, there was 100% monopoly of Public Sector Undertakings (PSUs) in the defence sector, but that policy was changed over the last decade to first allow 100 per cent private participation and later permitting 26% FDI in the defence industry.

But, the 26% FDI policy notwithstanding, the defence ministry would consider allowing more than the prescribed FDI in the sector "on a case-to-case basis," he added.

"Ultimately, forever I can not rule out (higher FDI). On a case-by-case basis, we will allow more FDI in defence sector,"
he said.

Commerce ministry had recently brought out a discussion paper that called for allowing 100 per cent FDI in the defence sector, a demand forcefully made by foreign players who are eyeing the over $50 billion Indian defence spending expected over the next five years. 

"Commerce ministry has brought out a discussion paper only. The Commerce Minister himself said it is a discussion paper. We can discuss. There is no problem. You should not think there is a clash (between the two ministries)," Antony said.

He said the annual review of the DPP was in progress and in the next round of DPP amendments, his Ministry would give more emphasis on Indianisation to strengthen domestic defence
industrial base.

"Not only the PSUs, we will give more space to private sector also. So by combining the resources and capacity of the PSUS and Indian private sector, we want to enhance the capacity of Indian defence sector.

This year, in the coming edition of DPP, our priority is to strengthen the Indian defence industry," he added.

To another question on environment ministry asking for a moratorium on new shipyards along the coast due to ecological
considerations, Antony said the priority was modernisation of
the Navy and Coast Guard by providing its more ships and
vessels to enable it to meet the increasing threats from the
seas and the coastal areas.

"Whatever is needed to expand the capacity to provide more ships and vessels to the Navy and the Coast Guard... whatever effort is needed, we will make. We must modernise the Navy at the earliest to enable it to meet the increasing threats from the seas and coastal areas as fast as possible,' he added.