India Will Not Raise Foreign Investment Limit: Antony

Mar. 29, 2012 - 11:11AM |
By VIVEK RAGHUVANSHI

http://www.defensenews.com/article/20120329/DEFREG03/303290004/India-Will-Not-Raise-Foreign-Investment-Limit-Antony?odyssey=tab|topnews|text|FRONTPAGE 

NEW DELHI — India will maintain a 26 percent limit on foreign direct investment (FDI) in local defense companies, Defence Minister A.K. Antony said at Defexpo 2012 here March 29.

A senior executive of the Federation of Chambers of Commerce and Industries, the lobbying agency for Indian industry that has been pushing for an increase in the FDI limit to more than 49 percent, said they were hoping Antony would propose raising the limit in his Defexpo speech.

Earlier, Antony opened Defexpo 2012, showcasing systems from the land, naval and security sectors. More than 335 Indian exhibitors and 232 foreign companies, mainly from France, Germany, Israel, Russia, the U.K. and U.S., and 58 official delegations will participate in the four-day show, which has been held biannually since 1998.

“Our quest for self-reliance in defense underlines the growing importance of private sector participation on the one hand and revitalizing the public sector on the other,” Antony said in his inaugural speech. “Our emphasis is on public-private sector partnership in the defense industry. Enabling policy framework has been put in place to develop indigenous capabilities through harnessing the potential and utilizing resources available, both in the public and the private sector.”

India continues to import nearly 70 percent of its weapons as the domestic production base has not taken off the way defense planners had hoped.

“The introduction of the ‘Buy and Make [Indian]’ category in defense procurement procedures is aimed at encouraging proactive participation of the Indian industry by way of forming joint ventures with any foreign manufacturer,” Antony said.

Defexpo 2012 opens against the backdrop of a major controversy involving the Indian Army chief, Gen. V.K. Singh, who has alleged that he was offered a bribe to clear the purchase of substandard trucks. At the heart of the controversy is Tatra Vectra Motors, a U.K.-based company that has supplied Tatra trucks to the Indian Army since 1986 through state-owned Bharat Earth Movers. The controversy has rocked the Indian parliament, which is in session.

Defense procurement in India has been fraught with charges of misdeeds, said Nitin Mehta, a defense analyst here. In the last 10 years, a number of defense programs were canceled and rebid because of allegations of corruption leveled against the competing companies. Singapore Technologies, Israel Military Industries and Rheinmetall Air Defence were banned earlier this month from doing business in India for a decade following charges of corruption.

Regarding transparency in procurement, Antony said, “If we find anything wrong, we will not hesitate to cancel the contract at any stage. There will be zero tolerance to corruption. We have canceled many major contracts following corruption charges. We have very strong safeguards on integrity. For any contract beyond $20 million, integrity is a must. In the integrity pact, the strongest action will be taken against anybody found to be involved in malpractice. We will protect our interests and money.”

Critics claim that the transparency Antony emphasizes has delayed procurement. The Indian Army has not bought a single Howitzer gun since 1987 because of delays in defense production