New Delhi, July 26: The Government vide Press Note 5 (2016) dated 24.06.2016 notified review of Foreign Direct Investment (FDI) Policy on various sectors including defence. According to the revised guidelines, foreign investment up to 49% is allowed through automatic route and above 49% under Government route wherever it is likely to result in access to modern technology or for other reasons to be recorded. The foreign investment in defence sector is further subject to industrial licence under the Industries (Development & Regulation) Act, 1951.
2. The Government vide Press Note 3 of 2014 Series dated 26.06.2014 has notified defence products list for the purpose of issuing Industrial License for manufacture of licensable items under the Industries (Development & Regulation) Act, 1951.
3. Foreign investment in defence industry sector is subject to industrial licensing. Licensing Committee in Department of Industrial Policy and Promotion (DIPP) takes into account security clearance from the Ministry of Home Affairs and views of the Ministry of Defence. The Licensed Defence Companies are required to follow detailed security guidelines applicable to them as per security instructions / architectures prescribed in “Security Manual for Licensed Defence Industries” available at www.ddpmod.gov.in based on their categorization. The Manual provides detailed guidelines on physical security / materials security / documents security / information security etc. The companies are also subjected to external security audit by Intelligence Agencies once in two years and cyber security audit by CERT-IN empanelled auditors once every year.
4. Foreign investment above 49% is permitted in cases wherever the proposal is likely to result in access to modern technology or for other reasons to be recorded. Such proposals are considered by Foreign Investment Promotion Board (FIPB) based on the security clearance of MHA and comments of Ministry of Defence. In such cases, foreign investment is expected to bring in modern technology and production capability in the domestic defence production sector.
This information was given by Defence Minister Shri Manohar Parrikar in a written reply to Dr. Sanjay Sinh and Shri Naresh Agrawal in Rajya Sabha today.
