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Antony labels proposed hike in defence FDI a retrograde step

Defence Minister AK Antony has shot down Commerce Ministry's proposal to raise FDI in defence from 26 per cent to 49 per cent, saying it will be a ‘retrograde’ step and ‘stymie’ the growth of the domestic industry while increasing dependence on foreign manufacturers.

Antony has written a letter to Commerce Minister Anand Sharma, saying the FDI cap could not be raised as the country ‘cannot afford to be dependent on foreign companies and vulnerable to policies of their countries of origin’ in the field of defence on the long-term basis.

‘Allowing foreign companies to set up manufacturing assembly facilities here would be a retrograde step as it will stymie the growth of indigenous design and development, and our dependence on foreign countries and OEMs for modern weapons will get perpetuated,’ he wrote in the letter.

Antony was responding to Sharma's letter to him last month in which he had proposed the raising of FDI limit in defence sector from 26 per cent to 49 per cent.

‘The deliberated view of the Defence Ministry, therefore, remains that the FDI cap in the defence manufacturing sector should remain at 26 per cent,’ he wrote.

At the same time, the Defence Minister said whenever FDI beyond 26 per cent is likely to result in access to modern and state-of-the-art technology in the country, ‘decisions can be taken to allow higher FDI on a case to case basis by the Cabinet Committee on Security.’

To justify his opposition to the hike in FDI cap in defence sector, Antony said, ‘Building up our own indigenous capabilities for designing and developing weapon systems is vital.  Our effort is to build up indigenous capability in this field by encouraging the involvement of the private sector in defence. We are importing weapon systems for our immediate requirements, till we develop our own systems,’ he said.

The Commerce Ministry has been pushing for hiking the FDI cap in defence sector from 26 per cent. It had earlier proposed hiking it to 74 per cent but apparently due to Defence Ministry's tough stand on the issue, it has now proposed it to be 49 per cent.

‘I am in favour of raising FDI in defence to at least 49 per cent if not 74 per cent and this is what my department has recommended,’ the Commerce Minister had said.

After the AgustaWestland chopper scam, the Defence Ministry has been stressing on the development of indigenous weapon systems for meeting the military requirements.

It changed its procurement policy and stress is now on procuring from local industry and making imports the last option.

Antony recently said that ‘Indigenisation of military hardware is the ultimate answer’ to avoid controversies such as the chopper scam and asked the armed forces to change their mindset of relying on imports to meet operational requirements.
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