FDI Limit for Defence Equipment Hiked from 49% to 74%; FM Stresses on 'Make in India' for Defence

In the fourth tranche of measures, Finance Minister Nirmala Sitharaman announced policy reforms that will help build Atmanirbhar Bharat (self-reliant India)

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In the fourth tranche of measures under the special economic package of INR 20 lakh crore, Finance Minister Nirmala Sitharaman on Saturday announced policy reforms that will help build Atmanirbhar Bharat (self-reliant India).


FM stated that India needs to prepare for global competition by building a self-reliant country, adding that India also needs to face the challenges of the global value chain. "We are not looking inwards. It is making India rely on its strength, while facing the global challenges," she said.

Emphasis on Saturday's announcement was on policy reforms to fast-track investment in order to attain "Atmanirbhar Bharat'. This included fast track investment clearance through Empowered Group of Secretaries (EGoS), creation of Project Development Cell in each Ministry to prepare investible projects, coordinate with investors and Central/State Governments, ranking of States on investment attractiveness to compete for new investments and launch of incentive schemes for promotion of new champion sectors in sectors such as Solar PV manufacturing, advanced cell battery storage etc.

The fourth tranche of the economic package focused on eight sectors—coal, minerals, defence production, airspace managements/airports/MRO, power distribution companies in UTs, the space sector and atomic energy.

To reduce import of substitutable coal and increase self-reliance in coal production, the government is introducing competition, transparency and private sector participation in coal sector through a revenue sharing mechanism in place of regime of fixed rupee/tonne. This will allow all and any party to bid for a coal block and sell it in the open market. The government will offer nearly 50 block immediately with no eligibility conditions, but only upfront payment with a ceiling.

On the defence equipment production front, the government will notify a list of weapons/platforms for ban on import with year-wise timelines, and will also ensure indigenisation of imported spares. For this, a separate budget will be given for domestic capital procurement ad this move will help to reduce the huge defence import bill, the FM claimed. Further, FDI limit in defence manufacturing under automatic route will be raised from 49 per cent to 74 per cent.

For the aviation sector, the government has decided to ease restrictions on utilisation of the Indian air space to increase efficiency of civilian flying. Only about 60 per cent of the Indian airspace is freely available right now which makes flying routes longer for airlines. Freeing up more space will bring a total benefit of INR 1,000 crore a year for the aviation sector as well as lead to a positive environmental impact as shorter routes will reduce fuel usage. Also, six more airports were announced for auction under a Public-Private Partnership (PPE) model.