Defence Min Seeks Safeguard In FDI Math
The defense ministry is pressurizing the GOI to modify the policy for calculating the foreign investment in Indian Companies as it opens up a possibility of foreigners taking ownership in defence production companies in excess of the 26%.
FDI ceiling for defence production is not applicable to services such as defence product design and development. Therefore, companies in this service segment with up to 49% FDI can invest in defence production without their investment being counted as FDI as they are 51% owned and controlled by resident Indians.
Defence ministry's stand on the issue can delay engineering major Larsen & Toubro’s plan to have two joint ventures with Germany’s EADS Deutschland GmbH with 24.5% FDI in defence production and a 51:49 joint venture in defence products design.
It is more relevant in sectors that have low FDI cap, such as defence production and not so much in areas where the threshold is high or have no cap at all. The finance ministry is likely to discuss this with the department of industrial policy and promotion (DIPP), the agency responsible for the FDI policy.
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