India’s business media reports possible changes in foreign direct investment (FDI) limits that range over legally significant figures from nothing to 26% and 49%, and on to 50%, 51%, 74% and 100%. The figures give foreign companies varying degrees of control. All this makes interesting story at home and abroad.
In the past the debates – or, rather, the pushes and pulls of (often suitcase-carrying) vested interests – have been invisible behind the headlines. But that has now partly changed. The Commerce Ministry’s industrial policy department (DIPP) has publicised a debate about whether FDI should be raised in defence production by issuing a discussion document that covers all the issues. Could find the Discussion Paper on http://dipp.nic.in/DiscussionPapers/DiscussionPapers_17May2010.pdf
The government’s defence manufacturing discussion paper has raised the basic question of whether FDI is needed and, if so, how much. This is a good question, and it has rarely been asked on any Indian FDI in the past.
Indian companies need time to establish themselves before FDI is allowed at such high percentages that foreign companies swamp the market and make India in effect a virtual subsidiary of powerful developed economies.
That is the issue now in defence – is it time to open up and how far? Currently the FDI limit is 26%, apart from a very few higher exceptions, and it is generally accepted that this is not enough to attract commitment, top executives and high technology from most foreign defence companies.
Strengthening that argument is the government’s evolving “offset” policy that requires foreign defence suppliers to spend 30%-50% of a contract’s value on defence equipment investment and purchasing in India. This is making it more attractive for the foreign suppliers to set up joint ventures here, and is correspondingly leading to increased foreign pressure on the government for FDI above 51%.
The domestic industry, led by companies such as Larsen & Toubro (L&T), M&M and various Tata group businesses, however wants the limit raised only to 49%so that they maintain control and have a chance to grow, having been restricted till relatively recently from doing more than supply components. This view has been backed by a recent Confederation of Indian Industry-KPMG survey with 57% of respondents saying “yes” to a higher FDI limit and 26% more saying “maybe”.
You could read the full Article on Debate of FDI in the Indian Defence Industry
Svipja Technologies has always advanced the argument on this Blog to limit FDI in Defence to 26% it being a strategic sector with provision of enhancement on 'case-by-case' depending on the quality and depth of technology being offered by a foreign partner, advocacy notwithstanding. I think that is fair and logical. Does not hurt anyone except for some procedural delays.
Svipja Technologies
Courtesy: USIBC and Its News Agencies.
Note: The Article was first written on RidingTheElephant Blog and then transferred to Financial Times.
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Svipja's Offset Practice
Our Offset Practice helps high-tech Defence and Aerospace Industry in offset projects. www.svipja.com/ refers.
We also empanel Offset Consultants with Industry knowledge in A & D. You could fill Your 'Resume' on http://www.svipja.com/careers.php , or 'Join as a Consultant' on www.indiandefenceindustry.com/
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Steps in Our Offset Process
Step 1: Acquaint Yourself first on Offset business. Please visit www.IndianDefenceIndustry.com , its connected Blogs and www.svipja.com in addition to other subject matter elsewhere. Offset Partnership and projects go thru rigorous 'Due Diligence' / 'Gate Reviews' by Vendors / Obligors.
Step 2: Register online on www.IndianDefenceIndustry.com using Internet Explorer to be part of the database of the Defence Industry. We are developing a consortium of MSMEs globally with
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Step 4: Become Industrial Sector Partner (ISP) of Svipja / India. We will guide the ISP firms go through qualified vendor registration process for Supply Chains of aerospace & defence firms.
Some of these steps could be attempted concurrently.
Commercials
1. Yearly Membership Fee for Registering on the Site and using e-Marketplace Engine for Buying/Selling, and accessing Info System, is as indicated in Tariffs on the Site. Fee is variable.
2. Separate Fee for Offset Consulting / Industrial Co-operation would apply. Contact svipja@gmail.com for further details.
3. Addl Fee will apply in case of market research, study and other services.
Conditions
1. Svipja provides guidance to the Indian ISP on project suitability and document/plan preparation for the Gate Review Process, and it's Presentation as required.
2. Svipja does not take responsibility for offset fund allotment to ISPs. This is decided by A &D Major Company based on the capability of the ISP to meet the needs of the A & D Major.
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