The Commerce and Industry Ministry is contemplating moving the Union Cabinet soon to raise the foreign direct investment (FDI) cap in the defence sector to at least 49 per cent from 26 per cent.

The government will also be making efforts to bring everyone on board to push through legislations in Parliament, seeking to raise FDI limits in pension and insurance sectors to 49 per cent from the present 26 per cent.

Similarly, telecom could be another sector where the FDI limit may be raised to 100 per cent from the present 74 per cent, and bring it under the automatic approval route.

Commerce and Industry Ministry sources told this correspondent that discussions were being held at the highest level in the government to raise the FDI in the defence sector.

Recently, Prime Minister Manmohan Singh had spoken about the government’s intentions to liberalise the FDI regime. Commerce and Industry Minister Anand Sharma had also pushed for raising the FDI limit in the defence sector.

“Preliminary discussions have already been held at the Prime Minister’s Office (PMO) as well as between Finance and Commerce ministries on raising the FDI limit in the defence sector. Now, efforts are on to muster support of Defence Minister A. K. Antony, who has stuck to his guns on not raising the FDI limit beyond 26 per cent,,’’ a senior official said.

Plans are also afoot to review the FDI limit in telecom and banking sectors.

Recently, Mr. Sharma had written to the Prime Minister to raise the FDI limit in the defence sector, stating that the government could retain the right to impose internal security conditions, including surveillance systems or controlling production and deployment of defence personnel.

Current limit

“The current limit of 26 per cent is not enough for transfer of state-of-the-art proprietary technologies. The fact that in the last decade we have received only $4.12 million of FDI inflow in defence manufacturing is a clear testimony to this fact,’’ he had remarked. Mr. Sharma is of the view that encouraging foreign defence manufacturers to establish production bases in India will provide a platform for transfer of high-end technology, and will also catalyse the growth of domestic manufacturing.

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