Easing of Rules helps Reliance Aerospace to Bag Defense Deal

It is no longer mandatory for a defense venture in India to ensure that a single Indian entity holds at least a minimum of 51% in a local defense venture.

Mumbai, Maharashtra, October 8, 2014 /India PRwire/ -- It is no longer mandatory for a defense venture in India to ensure that a single Indian entity holds at least a minimum of 51% in a local defense venture. In special cases, 100% foreign direct investment (FDI) has been allowed. The change in foreign ownership limits arrives after the campaign pledge made by Prime Minister Narendra Modi to relax some rules with an aim to attract more FDI.

How this Impacts the Private Sector

This small change has helped Reliance Aerospace Technologies Limited and Punj Lloyd Industries Limited to acquire long-awaited licenses. The earlier laws did not allow Reliance Aerospace to receive licenses to manufacture weapon launchers for combat aircraft. This is because the promoters held 45.3% in Reliance Industries Limited.

Similarly, the promoters of Punj Lloyd cumulatively have 37% stake in the company. This restricted wholly owned subsidiariesfrom acquiring licenses to manufacture rocket launchers, combat vehicles and torpedoes.

Opening Up the Defense Sector

While the government did not reveal any details, an official statement suggested that the committee has passed19 proposals for defense manufacturing licenses presented by a number of large Indian business houses such as the Mahindra Group, Bharat Forge Limited and the Tata Group.

In addition to this, in at least 14 other cases, the government has informed the companies that there is no longer a requirement these licenses. This included proposals such as the one put forth by Tata Advanced Systems to manufacture spacecraft and aircraft components. In addition to this, Mahindra Aerostructure's proposal to make aircraft parts and Reliance Aerospace's flight control system manufacturing also no longer require licensing.

Even before the FDI rules were altered, the Department of Industrial Policy and Promotion reduced the number of items in the defense sector that require licenses for manufacturing. The department also freed dual-use items from licensing requirements. Items such as aircraft components and radars that also have civilian use no longer require licenses for manufacturing.

Easing Off Rules

For decades, the defense ministry has looked down upon the entry of the Indian private sector in spite of the fact that the government relied on imports that often involved middlemen. During the UPA's term in office, the repeated plea made by the commerce and industry ministry to increase the FDI cap in defense was blocked by then minister, AK Antony.

It is known that India is among the world's largest importers of arms and needs support in modernizing its military. Building equipment locally can help save significantly on foreign exchange. In recent months, the overall mood seems to have changed as the Department of Defense Production supports foreign as well as private capital in local ventures.

The government is also working on further slackening the rules. This includes doing away with the annual capacity ceiling in industrial licenses and permission to sell without approval licensed items to other entities that are controlled by state governments, PSUs, the Home Ministry and other valid, licensed defense companies.

Notes to Editor

Companies like Reliance Aerospace and PunjLoyld acquire defense manufacturing licenses after government eases rules.

Journalists and Bloggers
Visit India PRwire for Journalists for releases, photos, email alerts and customized feeds just for Media.

If you have any query regarding information in the press releases, please contact the company listed in the press release itself. Please do not call India PRwire, we will be unable to assist you with your inquiry.

Reliance recent press release(s)

Jio and Samsung Win "Best Mobile Innovation for Emerging Markets" at Global Mobile Awards 2017

Jio and Samsung recognized as key innovators transforming India into a digitally empowered society.

Jio Announces Prime Membership as it Crosses 100 Million Subscribers

Jio is rolling out "Jio Prime Membership" as it crosses 100 million unique subscribers in India in record 170 days.

Misleading statements by AIRTEL regarding provisioning of POI capacity to RJIL over 53% of NLD calls failing due to inadequate POIs from AIRTEL

Reliance Jio reports over 53% of NLD call failures owing to inadequate number of PoIs from Airtel.

Nita Ambani honoured by The Metropolitan Museum of Art for her philanthropic efforts, in New York

Nita Ambani is the first South Asian honouree to receive this prestigious accolade.

Reliance-Sibur JV Plans to Set up South Asia's first Halogenated Butyl Rubber Unit at Jamnagar

Reliance Industries and SIBUR have planned to set up South Asia's first halogenated butyl rubber unit at Jamnagar.