A K Antony says no to rise in FDI cap in defence

In a letter to Commerce Minister Anand Sharma, Antony says FDI cap could not be raised as the country cannot afford to be dependent on foreign companies

Defence Minister A K Antony strongly opposed the move to raise foreign direct investment (FDI) cap in the defence sector to 49 per cent and said the current limit of 26 per cent was ‘good enough’.

“The country cannot afford to be dependent on foreign companies and be vulnerable to policies of their countries of origin, in the field of defence on a long-term basis,” Antony’s letter to Commerce and Industry Minister Anand Sharma said.

The minister, guided by the highly unionised Ordnance Factories Board and other defence public sector undertakings, wrote, “Allowing foreign companies to set up assembly units here would be a retrograde step as it would stymie the growth of indigenous design and development, and our dependence on foreign countries and original equipment manufacturers for modern weapons would get perpetuated.”

He said that even now, FDI limits could be relaxed on a case-by-case basis by the Cabinet Committee on Security. This should continue.

Antony argued that “building 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.”

“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.