Northern-region SMEs upbeat over hike in defence FDI

Small and medium enterprises (SMEs) based in the northern region and supplying equipment to the defence sector are upbeat over the increase in the foreign direct investment (FDI) limit in the defence sector from 26 per cent to 49 per cent. They believe that the decision will help attract new technology and capital, encourage collaboration, and benefit cash-starved SMEs.

Industrialists said that this would encourage MNCs to enter into co-development and co-production arrangements with Indian companies, triggering innovation and generating employment opportunities in the manufacture of defence products. Analysts said that the domestic defence industry, which imports up to 70 per cent of its military hardware, will receive a boost.

Sunchit Sobti, director of Jalandhar-based Laggar Industries, told Business Standard, "This is a revolutionary step that the government has taken to modernise the forces, which will give a fillip to the SME sector. Lots of foreign companies will be scouting for joint ventures, and this is where the opportunity lies for Indian companies. The move will bring in much-needed capital, encourage collaboration and create jobs."

His company is looking for joint ventures and technology collaboration with foreign companies to manufacture state-of-the-art equipment in India.

Laggar Industries is a leading developer and manufacturer of bulletproof steel, armored vehicles and allied security products, using bullet-proof glass and bullet-proof steel plates, besides head gear and steel inserts for jackets. Popular models of armoured utility vehicles include the Ambassador car, Mitsubishi Pajero, Toyota Land Cruiser and M&M's Scorpio. Recently, Laggar also added the Toyota Fortuner. Besides catering to the domestic market, the company also exports to Nigeria, Kenya, Latin America, South Africa, Ireland, Philippines and Malaysia.

Sunil Sahdev, managing director of Chandigarh-based Security Defence Systems said his company is also looking at technological collaboration with foreign companies. Its manufacturing unit at Baddi in Himachal Pradesh makes bullet-proof jackets, bullet-proofing equipment, door-frame metal detectors, mine detectors, and so on.

He added: "The increase in FDI will bring high-technology products to India which is likely to boost SMEs who are in defence equipment supplies. In addition, it will bring more avenues. We foresee immense opportunity for this sector."

Sahdev said his company is also looking at technological collaboration with foreign companies. Its manufacturing unit at Baddi in Himachal Pradesh makes bullet-proof jackets, bullet-proofing equipment, door-frame metal detectors, mine detectors, pocket scanners, premises security equipment, bomb detection equipment, and bomb disposal equipments. The company sells to state police forces in India, the paramilitary forces, the army, navy, and air force, public sector enterprises, banks, Indian Railways, and private institutions like malls and educational institutes.

In an interaction with Business Standard, Lt Gen K J Singh, AVSM, GOC-in-C, Western Command, Chandimandir (Haryana) said, "The Indian government is strongly committed to involving industry in defence production, and hence recently eased regulations and licensing required for production of a lot of items by removing them from the negative list for production by civilian industry. So I invite MSMEs and large-scale industry from this region to dedicatedly manufacture and supply top-quality latest-technology products, components and parts to defence, paramilitary and security forces."

SMEs that are struggling to survive owing to the lack of capital and cash-flows would benefit from the increase in the FDI limit, he added.