Government relaxes norms for FDI in defense sector

New Delhi: The government on Tuesday relaxed foreign direct investment norms in the defense sector by allowing FDI up to 49 per cent under automatic route and beyond that through the FIPB's approval.

The government has also done away with the earlier requirement of mandatory permission from the Cabinet Committee on Security (CCS) beyond 49 per cent.

As per the earlier FDI policy in the sector, foreign investment up to 49 per cent was permitted under government approval route. Portfolio investment and investment by FVCIs were restricted to 24 per cent only.

In this regard, under the new norms, which come into force with immediate effect, "foreign investment up to 49 percent will be under automatic route," the Commerce and Industry Ministry said in a statement.

Portfolio investment and investment by FVCIs will also be allowed up to permitted automatic route level of 49 per cent, it said. It also said that proposals for foreign investment in excess of 49 per cent will be considered by Foreign Investment Promotion Board (FIPB).

"In case of infusion of fresh foreign investment within the permitted automatic route level, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, Government approval will be required," it added.

Although the government has relaxed the FDI cap in the sector last year August, but no overseas investment has been received in the segment, according to an official. The move is aimed at boosting domestic industry of the country, which imports up to 70 per cent of its military hardware.

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