Foreign Direct Investment(FDI) Policy in Defence Sector

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News: Department for Promotion of Industry and Internal Trade(DPIIT), Ministry of Commerce and Industry has issued the revised Foreign Direct Investment (FDI) Policy in Defence Sector.

Facts:

  • Present Position: 
      Sector/Activity    % of Equity/ FDI Cap      Entry Route
Defence Industry subject to Industrial license under the Industries(Development & Regulation) Act,1951 and Manufacturing of small arms and ammunition under the Arms Act, 1959            100%Automatic up to 49%. Government route beyond 49% wherever it is likely toresult in access to modern technology or for other reasons to be recorded.
  • Revised Position:
      Sector/Activity    % of Equity/ FDI Cap      Entry Route
Defence Industry subject to Industrial license under the Industries(Development & Regulation) Act,1951 and Manufacturing of small arms and ammunition under the Arms Act, 1959            100%Automatic up to 74%. Government route beyond 74% wherever it is likely to result in access to modern technology or for other reasons to be recorded

Other Conditions:

  • Fresh Licensees: FDI up to 74% under automatic route shall be permitted for companies seeking new industrial licenses.
  • Existing Licensees: Infusion of fresh foreign investment up to 49% in a company not seeking industrial license will require mandatory submission of a declaration with the Ministry of Defence in case change in equity/shareholding pattern or transfer of stake by existing investor to new foreign investor for FDI up to 49% within 30 days of such change.
    • Proposals for raising FDI beyond 49% from such companies will require Government approval.
  • License: Licence applications will be considered by the Department for Promotion of Industry and Internal Trade,Ministry of Commerce & Industry in consultation with the Ministry of Defence and Ministry of External Affairs.
  • Security Clearance: Foreign investment in the sector is subject to security clearance by the Ministry of Home Affairs and as per guidelines of the Ministry of Defence on grounds of National Security and Government reserves the right to review any foreign investment in the Defence Sector that affects or may affect national security.