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		In some easing of investment rules for the defence sector, the government has apparently done away with the condition of 51 per cent equity ownership by a single Indian partner while raising the foreign investment cap to 49 per cent from 26 per cent.</div>
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		It has also lifted an earlier three-year lock-in period for foreign investment in this sector.&nbsp;</div>
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		Notifying the Cabinet&#39;s recent decision in foreign direct investment (FDI) policy on Tuesday, the department of industrial policy and promotion also lifted the prohibition on foreign portfolio investment (FPI) in the defence sector but capped it at 24 per cent.</div>
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		The earlier FDI policy for the sector had a clause that the equity held by the largest Indian shareholder would have to be at least 51 per cent, excluding that held by public sector banks and public financial institutions.</div>
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		This, experts said, has been done away with. So, while foreign investment would be allowed till 49 per cent, more than one Indian entity could hold 51 per cent or more stake in the company.</div>
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		&quot;The amended FDI policy addresses some of the industry&#39;s concerns. A plain reading of DIPP&#39;s Press Note shows that the condition of 51 per cent equity ownership by a single Indian partner has apparently been dispensed with,&quot; said Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG.</div>
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		The cabinet had recently raised foreign investment cap to 49 per cent from the earlier 26 per cent. This 49 per cent could be a combination of FDI, FPI, investment by non-resident Indians (NRIs) and by foreign venture capital investors (FVCI). However, investment other than FDI -- by FPI, NRIs and FVCI -- has been allowed only up to 24 per cent. Currently, there is prohibition on this investment.&nbsp;</div>
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		&quot;One reason behind restricting FPI, FVCI etc to 24 per cent could be to limit the involvement of entities whose real owners are not known to MoD (the ministry of defence),&quot; said Dubey.&nbsp;</div>
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		Lifting of the three-year lock-in for non-resident investors was a positive development, he said.&nbsp;</div>
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		The revised policy says FDI beyond 49 per cent could also come in the defence sector, provided it is cleared by the Cabinet Committee on Security and is likely to result in access to state-of-art technology. For up to 49 per cent, approval from the Foreign Investment Promotion Board is needed, while FPI, NRI, or FVCI investment has been allowed automatically up to 24 per cent.&nbsp;</div>
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		&quot;MoD would do well to define &lsquo;state-of-the-art technology&rsquo;. These can be subjective and are susceptible to interpretation issues, bureaucratic delays and judicial challenge by interested parties,&quot; said Dubey.&nbsp;</div>
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Lifts 3-year lock-in period for foreign investment in the sector

Govt notifies defence FDI change

Lifts 3-year lock-in period for foreign investment in the sector

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