There is no immediate need to increase the upper limit on foreign direct investment in military hardware production, Defence Minister A.K. Antony said on Thursday.

He was expressing his views on a Commerce Ministry discussion paper that suggested that the FDI cap be raised.

“At the moment, it is 26 per cent. Our defence production policy is evolving over the years, but at the moment we feel the Indian defence sector is not mature enough to absorb more FDI. We feel that the time is not right to further expand it,” Mr. Antony told journalists on the sidelines of a Navy commanders' conference here.

However, “ultimately, forever I cannot rule out higher FDI. On a case-by-case basis, we will allow more FDI in the defence sector.”

The policy had come a long way since the time the public sector held a monopoly over defence equipment production. Over the past 10 years, the policy was changed to permit the private sector in all segments; FDI, once banned outright, now stood at 26 per cent.

Mr. Antony made it clear that his views should not be seen as being at odds with that of the Commerce Ministry.

‘No clash'

“The Commerce Ministry has brought out only a discussion paper. The Commerce Minister himself has said it is a discussion paper. We can discuss, there is no problem. You should not think there is a clash.”

Fine-tuning purchase policy

While the Defence Ministry wanted the FDI limit to remain unchanged, it would shortly fine-tune its purchase policy to give more space to the public and private sectors to promote indigenisation of defence hardware production, he said.

Priority for coastal security

Earlier addressing the commanders, Mr. Antony said: “Coastal security is a very high priority for the government and the nation. The government is equipping both the Navy and the Coast Guard for coastal surveillance and patrolling … in terms of both assets and manpower. Proposals towards this end have been approved. It is now the responsibility of all of you to ensure that these are put in place at the earliest and used effectively and efficiently for coastal security.”

As for the island territories, he said it was important to secure the Andaman and Nicobar Islands and the Lakshadweep Islands as they formed a natural bulwark that extended “our strategic arms to the East and the West and function as the last outpost for the defence of our mainland.” While the first operational tri-services command was functioning on the Andaman and Nicobar Islands, it was time to give “our undivided attention” to the Lakshadweep Islands as they straddled the oil artery of the world.

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