desiman
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Commerce ministry suggests 100% FDI in defence to address failure, MoD will resist
India has failed miserably in attracting FDI investment in defence, a key to attaining self sufficiency in defence equipment. 8ak sources and a Pragmatic report confirm that India managed to attract a meagre Rs 70 lakh in defence FDI since 2001.
Now another key ministry has tried to come to the rescue - The Hindu reports that the Commerce Ministry has sent a note to the cabinet secretariat suggesting that global defence companies be allowed to set-up manufacturing units with 100% FDI under the FIPB/CCEA approval route. The commerce ministry feels that such a move would also cut down the role of touts and middle men. The note says that the possibility of the company passing critical equipment key to enemy countries persists, however, if the production is taking place in India, it would be easier to control production and monitor these companies.
However, according to DNA, the MoD has termed the move bizarre and a private sector player has said that without the backing of MoD, such a proposal will have no validity.
All industry associations like CII, FICCI and Assocham, the CEOs of top Indian and Foreign private sector players and foreign governments have repeatedly asked the Ministry of Defence to increase the cap but the MoD refuses. The bizzare explanation for this refusal was revealed when 8ak interviewed Bharat Verma, Editor of Indian Defence Review. Verma said that the MoD explanation of the issue is that "We allowed 26% FDI and nobody came, so why should we increase it to 49%?".
Unfortunately for India and unlike China, the MoD officials on their two year terms have no procedures in place to measure performance, have never been held accountable for their actions that result in national failure and can hide their inefficiencies/failures behind the Official Secrects Act. Business Standard did a great report on how the MoD dodges accountability even from audits from the Comptroller and Auditor General and even questions from parliamentary committees.
Bharat Verma has said that foreign companies are eager to invest in Indian defence (see 8ak's reporty "Eurojet ready to transfer crystal blade technology") and are willing to share key technology with India, but a 26% ownership cap was a big barrier for them to transfer technology that they have spent billions developing.
As earlier reported that a high powered defence committee had proposed to allow 49% FDI in defence and also enhance the limit to 74% and 100% on case-by-case basis. Full recommendation. But this has never been implemented even for leading global companies like BAE Systems and EADS so smaller companies have little or no hope.
India has failed miserably in attracting FDI investment in defence, a key to attaining self sufficiency in defence equipment. 8ak sources and a Pragmatic report confirm that India managed to attract a meagre Rs 70 lakh in defence FDI since 2001.
Now another key ministry has tried to come to the rescue - The Hindu reports that the Commerce Ministry has sent a note to the cabinet secretariat suggesting that global defence companies be allowed to set-up manufacturing units with 100% FDI under the FIPB/CCEA approval route. The commerce ministry feels that such a move would also cut down the role of touts and middle men. The note says that the possibility of the company passing critical equipment key to enemy countries persists, however, if the production is taking place in India, it would be easier to control production and monitor these companies.
However, according to DNA, the MoD has termed the move bizarre and a private sector player has said that without the backing of MoD, such a proposal will have no validity.
All industry associations like CII, FICCI and Assocham, the CEOs of top Indian and Foreign private sector players and foreign governments have repeatedly asked the Ministry of Defence to increase the cap but the MoD refuses. The bizzare explanation for this refusal was revealed when 8ak interviewed Bharat Verma, Editor of Indian Defence Review. Verma said that the MoD explanation of the issue is that "We allowed 26% FDI and nobody came, so why should we increase it to 49%?".
Unfortunately for India and unlike China, the MoD officials on their two year terms have no procedures in place to measure performance, have never been held accountable for their actions that result in national failure and can hide their inefficiencies/failures behind the Official Secrects Act. Business Standard did a great report on how the MoD dodges accountability even from audits from the Comptroller and Auditor General and even questions from parliamentary committees.
Bharat Verma has said that foreign companies are eager to invest in Indian defence (see 8ak's reporty "Eurojet ready to transfer crystal blade technology") and are willing to share key technology with India, but a 26% ownership cap was a big barrier for them to transfer technology that they have spent billions developing.
As earlier reported that a high powered defence committee had proposed to allow 49% FDI in defence and also enhance the limit to 74% and 100% on case-by-case basis. Full recommendation. But this has never been implemented even for leading global companies like BAE Systems and EADS so smaller companies have little or no hope.
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