Jaitley hints at raising defence FDI cap - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Wednesday 28 May 2014

Jaitley hints at raising defence FDI cap

New defence minister endorses UPA appointment of Lt Gen Dalbir Singh Suhag as next army chief

By Ajai Shukla
Business Standard, 28th May 14

On a day when most new ministers reached their respective ministries bright and early, it was past noon when Arun Jaitley arrived at the defence ministry (MoD) in South Block, after spending the morning at the finance ministry across the road.

Mr Jaitley quickly clarified that his custodianship of three crucial ministries --- finance, corporate affairs and defence --- did not mean the MoD would remain neglected for long. Terming this a “transient phase”, he said a full-time defence minister would be appointed in a cabinet expansion within a “couple of weeks”.

Notwithstanding his temporary status, Mr Jaitley hinted that the 26 per cent cap on foreign direct investment (FDI) in the defence sector could be raised, which has been a longstanding demand from international defence companies.

Pointing out that FDI in defence had first been allowed by the Vajpayee government (in 2001), Mr Jaitley said that he would be “personally willing to examine” a review of the cap.

Noting that the finance and corporate affairs ministries would play a role in any decision to raise the FDI limit, he admitted that the question “had already come up in my preliminary discussions today and therefore I do not want to say anything more before I look deeply into the matter.”

The BJP’s election manifesto said that it would “encourage private sector participation and investment, including FDI in selected defence industries.” The manifesto does not commit to increasing the FDI cap across the board.

Mr Jaitley endorsed the UPA government’s decision to name Lt Gen Dalbir Singh Suhag as the next army chief, stating, “I firmly believe that there should be no controversy on appointment of the person concerned. Some comments may have been made regards the procedure of (his) appointment but there should be no reflection on the person concerned.”

Taking a swipe at the AK Antony-led MoD for having “slowed down” equipment modernisation, the stopgap defence minister declared that quick procurement would be “a matter of top priority” for the new government.

However, Mr Jaitley struck a more cautious note whilst addressing senior ministry bureaucrats of the rank of joint secretary and above. He stated that the government would like to accelerate equipment procurement, “but established procedures are there. We would like to ensure that there are no avoidable consequences.”

The three service chiefs also called on Mr Jaitley together in his office.

Also at the MoD today was the new minister of state for defence, Rao Inderjit Singh, who had held the same portfolio in the UPA government from 2004-2009. His disillusionment with the Congress began after he was dropped as a minister in 2009, leading eventually to his joining the BJP.

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