The Hindu : Panel favours higher FDI in defence sector

Online edition of India's National Newspaper
Tuesday, Sep 10, 2002

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Panel favours higher FDI in defence sector

By Our Special Correspondent

NEW DELHI SEPT. 9. The N.K. Singh panel on foreign direct investment (FDI) during the Tenth Five Year Plan has recommended high level of foreign equity in the defence sector for production of sophisticated equipment which would otherwise have to be imported.

While accepting the proposition that there was absolutely no need to put equity restriction on production of civilian goods used by the defence forces, the panel felt that it was more important to determine FDI equity limits in domestic production versus import decisions.

"Most discussions of FDI limits is carried out on the presumption that the item would be produced in India no matter what, and the only choice is the level of FDI equity or management control. The reality is that considerable defence equipment is imported, more often that not from privately owned companies. In this situation, the choice is much more likely to be between FDI with high level of foreign equity and management control and continued imports,'' the panel said in its report presented to the Prime Minister, Atal Behari Vajpayee, last Friday.

Making a choice, the panel has pitched in for domestic production of sophisticated items of use by the defence sector with high level of foreign equity and management control instead on depending on continued imports.

Consequently, its recommendation is that import substitution in the defence industry should be allowed with much greater level of foreign equity.

Commenting on another dimension relating to the bans imposed by the developed countries on import of defence and dual use goods and strategic technology, the panel expressed the view that unlimited equity share and tax benefits could help attract such technology to India and the country could benefit tremendously in the long run by achieving greater domestic control and self sufficiency.

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