Industry body seeks 100 percent FDI in defence
Sunday March 25, 2012 10:48:44 AM,
IANS
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New Delhi: With
India edging past China as the world's largest arms importer, an
industry body has sought increase in Foreign Direct Investment (FDI)
in the defence sector to 100 percent from the existing 26 percent
to attract advance military technology to India and for curbing
large-scale imports.
India currently imports 70 percent of its military equipment and
system needs from abroad, with Russia, Israel and the US emerging
as the three largest weapons and platforms suppliers to New Delhi
in the last decade.
Coming just after the government presented a defence budget for
2012-13 worth Rs.193,407 crore ($38.6 billion) earlier this month,
the Associated Chamber of Commerce and Industry of India (Assocham)
called for allowing 100 percent FDI in the defence sector "to
develop a domestic industrial base, encourage technology transfers
and curb large-scale imports."
"We must be realistic and recognise that defence production is a
capital- and technology-intensive sector. To develop a strong
industrial base in the country, we need both foreign capital and
technology," it said.
Assocham secretary general D.S. Rawat said the 26 percent cap on
FDI "has kept away both."
"We must reconsider the cap. There is no reason why we should have
one at all and not allow 100 percent FDI," Rawat said.
"Nascent industry protection comes from high tariff barriers and
investment incentives - not the other way, as India has.
Manufacturing within the country through foreign capital with full
transfer of modern technology is a far better option than
importing the equipment from abroad," he said.
The defence sector is like no other - it has a single buyer that
invariably buys through competitive bidding and very long product
development and procurement cycles.
"Both viability and competitiveness will be achieved if exports
are allowed and encouraged," Rawat said.
India has an excellent law on special economic zones which should
be leveraged to make it an important hub in the global supply
chain on aerospace and defence production, he said.
Assocham also called for the government to also reconcile
contradictions and align all relevant policies. "Clarity is needed
on what a defence product is and this definition should cover the
final product (not components) and have a direct link with
lethality or high-end technology," the industry body said.
Moreover, if a product or service is allowed foreign investment
under FDI policy, it should not be disallowed or have a different
cap imposed on it under the offset policy.
"We need to introduce greater transparency in - as well as
simplify - the offset approval process. The offset approval
process should be centralised in one permanent committee of the
Defence Offset Facilitation Agency," it added.
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