Anthony for more FDI in defence

Defence minister A K Anthony on Saturday hinted that his ministry is open to more foreign direct investment (FDI) in defence production to enhance indeginisation of military equipment and armaments.

"There was a time when only the defence establishments were allowed to produce all the military equipment required by the Armed Forces. There was no FDI... not even a role for the private sector. That scenario has changed now. We have allowed FDI to an extent of 26 per cent in defence production. We are also permitting joint ventures between defence establishments and international suppliers. This process will intensify and we are open to higher FDI step by step," Anthony told reporters here.

The minister, who was here to review the HAL performance, pointed out that the offset clause in defence purchases is 30 per cent (foreign contract worth Rs 300 crore or more will require the vendor to plough back 30 per cent of the contract value in offsets, or production in India that is directly related to that contract).

"Since the procurement has increased, the sky is the limit for the defence establishments. They should absorb the complete 30 per cent by upgrading and improving their R&D, HR skills and by forging joint ventures. Many foreign companies have evinced interest in forming alliance with Indian firms," he added.

According to Anthony, the increase in defence procurement can be attributed to the government's policy on raising the deterrence level.

"The situation (threat perception) is not what it was in the earlier years. Our relationship with the neighbours and other countries has improved. There are some problems...the dialogue process will continue. At the same time, we have to maintain a minimum deterrence," he stated.