BANGALORE: In a bid to send a strong signal to global investors as well as to try and move the production base of some equipment into the country, the Modi government is proposing to raise FDI in defense sector to 100 percent through the approval route. But the Indian companies are being reluctant with the decision and are opposing the move, saying that the Govt should instead get reciprocal access to foreign markets and make it mandatory for foreign companies to transfer technology, as reported by Dev Chatterjee of Business Standard.
"There is no reason why we should allow 100 percent FDI in defence unless Indian companies get similar access in other markets," said an executive with Larsen & Toubro.
He further added that, "Foreign equity should be conditional on transfer of technology. The draft Cabinet note has proposed allowing 74 percent FDI where there is a technology transfer. There is also a suggestion that the no-cap policy should be limited to cases where there is a transfer of state-of-the-art technology."
"The foreign companies should be willing to transfer technology to India and there should be adequate training of Indian employees," said the executive who did not want to be named.
"We are not aware of the precise contours of government policy on FDI in defence," said a Tata group spokesperson. "However, we do see the need for significant investment in the sector and investment, including from the Indian private sector, deserves encouragement," he added.
Till 2002, FDI for private Indian companies were not allowed in the defense sector. But then it was the Atal Behari Vajpayee led Govt which decided to open the sector with 26 percent private contribution after the Kargil war. Since then, some of the big names like Larsen & Toubro, Mahindra and Reliance have entered the sector and received big contracts from the foreign firms.