Cabinet allows 49 per cent FDI in defence, 100 per cent in Railway infra
7 Aug 2014 5:39 AM IST
Going by the script given in the recently passed budget, the government on Wednesday approved raising the Foreign Direct Investment (FDI) limit in the defence sector to 49 per cent and opened up the railway infrastructure segment for FDI.
The decision to approve FDI was taken at a meeting of the union cabinet presided by prime minister Narendra Modi on Wednesday and it comes barely two weeks after the one to raise the cap of FDI in insurance sector from 26 per cent to 49 per cent.
The FDI ceiling in the sensitive defence sector has been hiked to 49 per cent from current 26 per cent, with the condition that control in joint ventures for manufacturing of defence equipment will remain in Indian hands. The move is aimed at boosting the domestic industry, which imports up to 70 per cent of its military hardware.
The proposal had been pending for several years as it was first mooted by the Commerce Ministry during the previos UPA government. However, the then Defence Minister A K Antony had blocked it, citing national security concerns. The NDA government has been arguing that the FDI limit needs to be hiked in defence to help expand the domestic industrial base in the sector.
In relation to the railways, the cabinet approved allowing 100 per cent FDI in areas such as high-speed train systems, suburban corridors and dedicated freight line projects implemented in PPP mode. Finance Minister Arun Jaitley in his Budget speech for 2014-15 had announced plans to increase FDI in the defence sector and open up the cash-starved government-owned Railways.
The FDI liberalisation in the sector, according to government, would help in modernisation and expansion of the railway projects. However, FDI will not be allowed in train operations and safety.
According to estimates, the sector is facing a cash crunch of around Rs 29,000 crore and allowing of FDI will help mop up resources.
The decision to approve FDI was taken at a meeting of the union cabinet presided by prime minister Narendra Modi on Wednesday and it comes barely two weeks after the one to raise the cap of FDI in insurance sector from 26 per cent to 49 per cent.
The FDI ceiling in the sensitive defence sector has been hiked to 49 per cent from current 26 per cent, with the condition that control in joint ventures for manufacturing of defence equipment will remain in Indian hands. The move is aimed at boosting the domestic industry, which imports up to 70 per cent of its military hardware.
The proposal had been pending for several years as it was first mooted by the Commerce Ministry during the previos UPA government. However, the then Defence Minister A K Antony had blocked it, citing national security concerns. The NDA government has been arguing that the FDI limit needs to be hiked in defence to help expand the domestic industrial base in the sector.
In relation to the railways, the cabinet approved allowing 100 per cent FDI in areas such as high-speed train systems, suburban corridors and dedicated freight line projects implemented in PPP mode. Finance Minister Arun Jaitley in his Budget speech for 2014-15 had announced plans to increase FDI in the defence sector and open up the cash-starved government-owned Railways.
The FDI liberalisation in the sector, according to government, would help in modernisation and expansion of the railway projects. However, FDI will not be allowed in train operations and safety.
According to estimates, the sector is facing a cash crunch of around Rs 29,000 crore and allowing of FDI will help mop up resources.
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