K.V. Prasad

NEW DELHI: Even as the government is mulling over plans to increase the Foreign Direct Investment (FDI) limit to 49 per cent in the Fifth Generation Fighter Aircraft (FGFA) project with Russia, the Defence Ministry does not visualise across the board raising the cap from existing limit of 26 per cent.

India and Russia are working on the co-development and co-production of FGFA, with Sukhoi Design Bureau, Russia, that seeks to counter the United States made F22 Raptor. Earlier this year, fifth generation fighter Sukhoi T-50 prototype made its maiden flight. Sources in the Ministry said a proposal to revise the FDI limit in this joint venture project is being studied.

Last year during his visit to Moscow, Defence Minister A.K. Antony highlighted New Delhi's interest in ensuring that the development phase of the FGFA is completed by 2016 so that the IAF can, as per plans, start its induction in 2017.

In May 2001, the government opened the defence industry sector upto 100 per cent for private sector participation, with FDI permitted upto 26 per cent, both subject to licensing. Since then, trade organisations have been urging the government to hike the FDI limits, but on several occasions, the government made it clear that it will consider raising the cap on a “case-to-case” basis and not across the board.

Mr. Antony has been pressing to reverse the present trend with India importing 70 per cent of its defence procurement and in the last Defence Procurement Policy, it announced a new category of Make and Buy (Indian).

The category allows issue of Request for Proposal to Indian industries having requisite financial and technical capabilities to absorb technology and undertake indigenous manufacture. The move envisaged production and development by Indian industry through transfer of technology.