Par panel for hike in FDI cap in defence prod

The government should increase the limit of foreign direct investment in defence production from the present 26 per cent, chairman of Parliamentary Standing Committee on Commerce and Industry Shanta Kumar has said.

"The Chairman suggested that FDI limit in the field of defence should be increased," according to minutes of the Committee's report on demands for grants for the ministry.

Views of Shanta Kumar, a senior BJP leader, are similar to that of the Department of Industrial Policy and Promotion (DIPP), the nodal agency for the FDI policies.

At present, FDI up to 26 per cent is permitted in the defence sector, subject to the Foreign Investment Promotion Board (FIPB) approval.

DIPP is shortly expected to float draft proposals through a concept note for views of the stakeholders.

While the department is understood to be favouring increase in FDI in defence, the opposition seems to be coming from the defence establishment.

Minister of State for Defence M M Pallam Raju had said in the Rajya Sabha on April 28 that the government was not planning to allow 100 per cent FDI in defence production sector.

He said the policy of 26 per cent overseas stake in defence joint ventures was "arrived at taking into account the sensitive nature of the defence sector".

Commerce and Industry Minister Anand Sharma had also stated recently the government was open to liberalise FDI norms in defence and inter-ministerial consultations were on.

Major industrial houses like Larsen and Toubro, the Tatas, the Mahindras and Punj Lloyds are already engaged into different defence-related businesses.

Of the total defence allocations of Rs 1,47,344 crore for 2010-11, a large chunk of Rs 60,000 crore has been earmarked for capital expenditure.

While the country has large domestic defence manufacturing base, mainly in the government sector, the government sources equipment worth Rs 30,000-35,000 crore for the world's second largest 1.5 million strong force.