The Department of Industrial Policy and Promotion has recently cleared 19 proposals for defence production in which some of the leading corporate giants are involved

Thanks to the liberalised delicensing procedure as outlined in the Foreign Direct Investment Policy,  which raised the FDI cap from 26 to 49%, fourteen pending applicants for defence related projects were adviced that licenses were not required for them anymore, while 19 were cleared by the DIPP.

This notification also permits portfolio investment upto 24% of the total equity of the investee  and joint venture company under the automatic route.  Such a move makes FDI entry easier.

The Department of Industrial Policy and Promotion has recently cleared 19 proposals for defence production in which some leading corporate giants are involved.  Companies reported to have obtained clearance are, Reliance Aerospace Technologies, Bharat Forge, Mahindra Telephonic Integrated Systems, Punj Lloyd and Tata Advanced Materials Ltd.

Press reports indicate that Airbus of France may partner the Tatas to build military transport planes.  In the past, the Indian Air Force has solely depended on Avros for transport Aircraft, but these ageing planes now need to be upgraded or replaced. It is likely that this Airbus-Tata joint venture may make serious bids and secure the contract to build these planes in the country.

It has also been reported in the press that the Defence Acquisition Council recently met and has cleared various projects estimated to be valued at Rs 80,000 crores.

These include six submarines, to be built in Indian shipyards with foreign collaboration, valued at Rs 50,000 crores over ten years.  Besides this project, other proposals include, "Spike", an anti-tank missile of Israeli origin, which has been under trial and evaluation in the Army. Spike has been chosen over the "Javelin" from the US and the initial deal is said to cover 321 launchers and 8356 missiles; but the technology for making Spikes will be transferred to facilitate indigenous manufacture in India. This project is estimated to be worth Rs 20,000 crores.

Other defence deals include two midget submarines, 12 Dornier maritime patrol aircrafts for the Navy, 363 BMP-II infantry combat vehicles for the army, valued at Rs 1800 crores, Russian Uran missiles worth Rs 1436 crores, 1768 new railway wagons for transporting tanks, missiles and ammunition valued at Rs 740 crores, and Rs 662 crores allocated for 1761 radio relay containers mounted on vehicles.

Both Mazagon Docks and Larsen & Troubro Shipyards are already associated with some of the defence contracts, and their past performance should enable them to get some opporutnitites in the new defence deals. Railway wagon manufacturers are also likely to benefit as a result. The most important issue to keep in mind is that timelines need to adhered to and quality control needs to be impeccable.