NEW DELHI \u2014 The Indian Ministry of Defence (MoD) is considering changes to its policy that limits how much overseas defense companies can invest in a joint venture with an Indian company.<\/p>\n\n\n\n
Indian law allows automatic foreign direct investment (FDI) but with an upper limit of\u00a049\u00a0percent. The limit can be increased beyond 49 percent up <\/span>to\u00a0100\u00a0percent, but only on a case-by-case basis. However, no clearance has been given to any overseas foreign company beyond 49 percent as the procedures are regarded as cumbersome and confusing.<\/p>\n\n\n\n “Overseas defense companies want to invest beyond 49 percent but there is no set procedure so far on giving approval for FDI investments beyond\u00a049\u00a0percent,” an MoD official said.<\/p>\n\n\n\n With the aim of speeding the clearances, the MoD is considering an internal note on the matter \u2014\u00a0in consultation with the domestic defense industry, which also seeks speedy clearance for FDI.<\/p>\n\n\n\n Indian\u00a0Defence Minister Manohar Parrikar told Parliament early this month that only $0.16 million has been invested through the FDI route since 2014.<\/p>\n\n\n\n Pierre de Bausset, president of Airbus Group India has said that his company needed to own a majority share in joint ventures to justify more investment.<\/p>\n\n\n\n The ruling government had increased the FDI limit from 26 percent to\u00a049\u00a0percent in January 2015 but overseas companies have continued to shy\u00a0away from investing in India.<\/p>\n\n\n\n Still, analysts say increasing the FDI limit\u00a0does not guarantee such investments in India’s defense industry.<\/p>\n\n\n\n “It is unlikely that any foreign original equipment manufacturer (OEM) will be willing to bring in state-of-the-art technology without control over management of the entity to which it is transferred in India,”\u00a0said Amit Cowshish, MoD’s former additional finance secretary. “But even this may not be enough. To my mind, no business case can be made for investment if there is no reasonable assurance of an order at the end of the process. The eco-system also has to improve several notched before India becomes a hot destination for investment in the defense sector.”<\/p>\n\n\n\n The MoD internal note seeks to clarify the issues\u00a0so that the Foreign Investment Promotion Board (FIPB) \u2014\u00a0the body that gives clearance to FDI ventures \u2014\u00a0can find it easier to approve\u00a0proposals beyond 49 percent.<\/p>\n\n\n\n The MoD note says proposals for FDI above 49 percent must be examined on case-to-case basis by a standing committee headed by the secretary of defense production,\u00a0the MoD official said. Secondly, the OEM will have to ensure a minimum level of indigenous content. Thirdly the OEM will have to appoint only Indian citizens as chief security officer and cyber information security officer of the Indian project.<\/p>\n\n\n\n Currently, the only proposal before the FIPB is from\u00a0DCNS of France to set up a 100 percent subsidiary in India to produce air independent propulsion\u00a0technology in submarines.<\/p>\n","protected":false},"excerpt":{"rendered":" The Indian Ministry of Defense (MoD) is considering changes in the Foreign Direct Investment (FDI) procedures to enable overseas defense companies easily make use of a special provision under which FDI investment up to100 percent can be m<\/p>\n","protected":false},"author":7,"featured_media":83522,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_yoast_wpseo_meta-robots-noindex":"","_yoast_wpseo_meta-robots-nofollow":"","_yoast_wpseo_canonical":"","_acf":"","_yoast_wpseo_primary_category":12,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","_smg_distribution_targets":[]},"categories":[33,12,19],"tags":[],"coauthors":[3390],"class_list":["post-42446","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-home","category-industry","category-pentagon"],"acf":{"subheadline":"","legacy_arc_id":"EVJMIGJQYJEOJAVDIF2C7ATFXQ","arc_canonical_url":"\/industry\/2016\/05\/11\/india-may-allow-greater-overseas-investment-in-joint-ventures\/","remove_feature_photo":false,"is_sponsored":false,"subtype":"","redirect_url":"","disable_inline_ads":false,"native_logo_pretext":"Presented By:"},"yoast_head":"\n