Government initiates exercise to raise FDI in defence sector to 100%

[Kloitra]

Government initiates exercise to raise FDI in defence sector to 100% - The Economic Times

NEW DELHI: In a major policy initiative, the government is proposing to raise FDI in defence sector to 100 per cent through the approval route.

"The Commerce and Industry ministry has circulated a Cabinet note for inter-ministerial consultation," sources told PTI.

The proposal to raise FDI cap in defence from 26 per cent to 100 per cent is aimed at giving a boost to the manufacturing activities.

As per the 15-page Cabinet note, which was circulated today, portfolio investors, including FIIs, would be permitted to invest only up to 49 per cent.

Further, the note said that a foreign company can even take over a domestic entity provided it brings in state-of-the art technology.

 

[kaykay]

It was long overdue. Good that they finally did it. Also afaik 100% FDI will be allowed on project basis and not for all project.

 

[Gandhi G in da house]

Can somebody explain how this will help our defence sector ?

 

[Kloitra]

Can somebody explain how this will help our defence sector ?

Speed up procurement, production. Save foreign currency. Besides, it will provide jobs. Help Indian companies to collaborate and learn.

 

[sancho]

Speed up procurement, production. Save foreign currency. Besides, it will provide jobs. Help Indian companies to collaborate and learn.

How does it help Indian companies, when the foreign companies will be in control of the majority of the project / JV and decide which parts will be diverted to the Indian partner and which aren't?
One of the key advantages of the current system was, that even in JV's the Indian part will be the controlling part, that's why it made sense to increase FDI to 49%, still giving the Indian industry the chance to form the best suitable JV for them. But when the foreign companies have the majority, they will choose the Indian partner with the least own demand isn't it?

 

[paranoiarocks]

How does it help Indian companies, when the foreign companies will be in control of the majority of the project / JV and decide which parts will be diverted to the Indian partner and which aren't?

Contracts can be done for technology transfer !

 

[Kloitra]

How does it help Indian companies, when the foreign companies will be in control of the majority of the project / JV and decide which parts will be diverted to the Indian partner and which aren't?
One of the key advantages of the current system was, that even in JV's the Indian part will be the controlling part, that's why it made sense to increase FDI to 49%, still giving the Indian industry the chance to form the best suitable JV for them. But when the foreign companies have the majority, they will choose the Indian partner with the least own demand isn't it?

Not directly. Indian companies might not get a chance to be involved in sensitive tech development. But things like parts which are already outsourced and not sensitive. All this apart, I meant that overall redtapism would be less of a hurdle than now, thus it would be for the Indian companies to up and grab whatever they can. The system would be much swifter and open than now, which is proven to be discouraging.

 

[shree835]

Government Initiates Exercise to Raise FDI in Defence Sector to 100 Per Cent: Report - NDTVProfit.com

Can somebody explain how this will help our defence sector ?

Hope this will help you to understand more on this.

According to Cowshish, FDI in defence will not only bring capital, but also technology, skilled manpower, and employment since it will allow the transfer of resources that are required to kick start indigenous green field research, design and development projects.

In fact, India istipped to become the world's third-largest defence spender after the US and China by next year, and equipment spending is reckoned to be $80-100 billion in the next 5 years. But without tweaking the FDI norms large foreign suppliers of defence equipment will not be interested in putting up supply bases in India.

What India loses by capping FDI in defence - Firstbiz

 

[Koovie]

Can somebody explain how this will help our defence sector ?

It will bring in investment, access to new technologies, it will create new partnerships, it will create jobs, further research, spur competition and will introduce new productions and management related know how.

 

[sancho]

Contracts can be done for technology transfer !

But not for critical once, take the Thales Samtel JV for example, when Thales is in control of the JV, they will divert uncritical techs to Samtel, to reduce the overall production cost of their product, while Samtel is degraded to a basic manufacturer, not a real partner, nor would it give Samtel anything important which they can take to improve their own capabilities in indigenous R&D. Today, Samtel is in charge and ask for certain techs that they are interested in (HMS, IRST and optronics currently), which obviously is better for India.

Besides, we already have this level of production in India, HAL is doing it for Boeing, Airbus..., Tata is doing it for Boeing, Sikirsky and AW..., but none of these productions gains into providing our forces credible arms and techs. We can only improve our technical capability in the defence industry, by getting critical techs from foreign vendors, not just production capacities.

No offence to the Bangladeshi members here, but I don't want India to be in the defence sector, what Bangladesh is in the textil sector. A low cost production hub for the world. I want India to gain from JV's and partnerships, to provide our forces the bulk of arms and techs they need to defend the country and someday even to develop high techs on our own. But that's not possible by producing airframe parts for foreign arms and techs for foreign forces!

It might get us jobs (at the low end) and that might be BJP's aim behind it, but it doesn't make us better or any less dependent from foreign arms and techs!

 

[Kloitra]

But not for critical once, take the Thales Samtel JV for example, when Thales is in control of the JV, they will divert uncritical techs to Samtel, to reduce the overall production cost of their product, while Samtel is degraded to a basic manufacturer, not a real partner, nor would it give Samtel anything important which they can take to improve their own capabilities in indigenous R&D. Today, Samtel is in charge and ask for certain techs that they are interested in (HMS, IRST and optronics currently), which obviously is better for India.

Besides, we already have this level of production in India, HAL is doing it for Boeing, Airbus..., Tata is doing it for Boeing, Sikirsky and AW..., but none of these productions gains into providing our forces credible arms and techs. We can only improve our technical capability in the defence industry, by getting critical techs from foreign vendors, not just production capacities.

No offence to the Bangladeshi members here, but I don't want India to be in the defence sector, what Bangladesh is in the textil sector. A low cost production hub for the world. I want India to gain from JV's and partnerships, to provide our forces the bulk of arms and techs they need to defend the country and someday even to develop high techs on our own. But that's not possible by producing airframe parts for foreign arms and techs for foreign forces!

It might get us jobs (at the low end) and that might be BJP's aim behind it, but it doesn't make us better or any less dependent from foreign arms and techs!

They (Indian companies) will have to watch and learn. Some how make inroads into this field. If they have done so in much more competitive fields like cars and mobiles, hopefully they would do so for defence too.

 

[JayAtl]

How does it help Indian companies, when the foreign companies will be in control of the majority of the project / JV and decide which parts will be diverted to the Indian partner and which aren't?
One of the key advantages of the current system was, that even in JV's the Indian part will be the controlling part, that's why it made sense to increase FDI to 49%, still giving the Indian industry the chance to form the best suitable JV for them. But when the foreign companies have the majority, they will choose the Indian partner with the least own demand isn't it?

sancho you should stick to and I say this respectfully to defense equipment and not policy.

A. just because it allows up to 100% does not mean every company will come in at 100%
B. No foreign company or most of them wanted to invest in India at even 49% in the defense sector. defense is higher risk high reward sector..and they wanted exercise control
C. This does not stop JV's period...
D. When foreign companies choose a JV, the indian counterpart will not suffer . I have no clue where you come with this stuff. There are JV's worldwide under similar circumstances... if anything it will help the indian companies to do a JV with mature and more experienced companies.
E. this means jobs jobs jobs for India
F. JV's will still govt approval too

 

[godofwar]

But not for critical once, take the Thales Samtel JV for example, when Thales is in control of the JV, they will divert uncritical techs to Samtel, to reduce the overall production cost of their product, while Samtel is degraded to a basic manufacturer, not a real partner, nor would it give Samtel anything important which they can take to improve their own capabilities in indigenous R&D. Today, Samtel is in charge and ask for certain techs that they are interested in (HMS, IRST and optronics currently), which obviously is better for India.

Besides, we already have this level of production in India, HAL is doing it for Boeing, Airbus..., Tata is doing it for Boeing, Sikirsky and AW..., but none of these productions gains into providing our forces credible arms and techs. We can only improve our technical capability in the defence industry, by getting critical techs from foreign vendors, not just production capacities.

No offence to the Bangladeshi members here, but I don't want India to be in the defence sector, what Bangladesh is in the textil sector. A low cost production hub for the world. I want India to gain from JV's and partnerships, to provide our forces the bulk of arms and techs they need to defend the country and someday even to develop high techs on our own. But that's not possible by producing airframe parts for foreign arms and techs for foreign forces!

It might get us jobs (at the low end) and that might be BJP's aim behind it, but it doesn't make us better or any less dependent from foreign arms and techs!

As far as I know FDI limit will be 49% for license manufacturing, 74% for full ToT and 100% for exceptional cases where a state of the art technology is being brought into India.

Like someone said, Indian companies will hopefully learn from this like in automobile sector.
Like by poaching employees or something.


Hopefully Tata and Ambani will become our Boeing and Lockheed Martin.

 

[JayAtl]

But not for critical once, take the Thales Samtel JV for example, when Thales is in control of the JV, they will divert uncritical techs to Samtel, to reduce the overall production cost of their product, while Samtel is degraded to a basic manufacturer, not a real partner, nor would it give Samtel anything important which they can take to improve their own capabilities in indigenous R&D. Today, Samtel is in charge and ask for certain techs that they are interested in (HMS, IRST and optronics currently), which obviously is better for India.

Besides, we already have this level of production in India, HAL is doing it for Boeing, Airbus..., Tata is doing it for Boeing, Sikirsky and AW..., but none of these productions gains into providing our forces credible arms and techs. We can only improve our technical capability in the defence industry, by getting critical techs from foreign vendors, not just production capacities.

No offence to the Bangladeshi members here, but I don't want India to be in the defence sector, what Bangladesh is in the textil sector. A low cost production hub for the world. I want India to gain from JV's and partnerships, to provide our forces the bulk of arms and techs they need to defend the country and someday even to develop high techs on our own. But that's not possible by producing airframe parts for foreign arms and techs for foreign forces!

It might get us jobs (at the low end) and that might be BJP's aim behind it, but it doesn't make us better or any less dependent from foreign arms and techs!

omg, dude how does an indian company become a leader if they don't even have the basics of the technology or investment for R&D?

besides investment in defense could yield a high percentage of exports for indian companies. we all know that India's process and bureaucracy is slow... a company would go under by the time they got an order- if they got one. Alternatively it would be able export if allowed to other countries.

you know what else it will do?????

do you believe India has the intellectual capital among its up and coming youth to produce great technologies? If you do - then you will have tons of small companies that need investments on their technology to mature able to find capital!

 

[karan21]

Hopefully Tata and Ambani will become our Boeing and Lockheed Martin.

Can you explain the though process that went through your brain to state this point?