Private industry gears up for bigger role in defence sector

In a landmark policy change, the defence industry was thrown open to the private sector in May 2001 (Press Note 4 of 2001 Series). The government allowed 100% equity with a maximum 26% foreign direct investment (FDI) component, both subject to licensing.

Subsequently, the Department of Industrial Policy and Promotion issued detailed guidelines, after consultations with the Ministry of Defence, for the issuance of licences for the production of arms and ammunition in January 2002 (Note 2 of 2002 Series).

The basic aim of allowing FDI in the defence sector was to pool capital and introduce the latest technology to manufacture state-of-art defence equipment for India’s armed forces and also to enter the export market at a significant scale.

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Gautam Khaitan is a partner at OP Khaitan & Co. He works mainly on corporate and commercial matters and has considerable experience over a wide range of corporate and commercial transactions.

Khaitan House

B-1, Defence Colony, New Delhi – 110 024, India

Tel: +91 11 4650 1000

Fax: +91 11 2433 7958, 4155 1590

Email: gkhaitan@opkhaitan.com

arihant@opkhaitan.com

Website: www.opkhaitan.com