Lok Sabha Question No. 3575 (UNSTARRED), answered on 2018-08-08
Subject: Impact of Foreign Investment
Ministry: DEFENCE
Asked by: SUNIL KUMAR MONDAL

## GOVERNMENT OF INDIA MINISTRY OF DEFENCE DEPARTMENT OF DEFENCE

## LOK  SABHA

## UNSTARRED QUESTION NO.3575

TO BE ANSWERED ON THE 8 TH  AUGUST, 2018

## IMPACT OF FOREIGN INVESTMENT

## 3575.  SHRI  SUNIL KUMAR MONDAL:

Will the Minister of DEFENCE j{kk ea=h be pleased to state:

- (a) whether the Government has assessed the impact of foreign investment in defence sector on the security of the country;
- (b) if so, the details of the impact in this regard; and
- (c) if not, the reasons therefor?

## A    N    S    W    E    R

MINISTER OF STATE IN THE MINISTRY OF DEFENCE

र  ा रा य मं ी

(a) to (c): A statement is attached.

*******

(DR. SUBHASH BHAMRE)

(डा. सुभाष भामरे)

## STATEMENT  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  TO  (c)  OF  LOK SABHA UNSTARRED QUESTION NO. 3575 FOR ANSWER ON 8.8.2018

Government vide Press Note no. 5 of 2016 Series dated 24.06.2016 has  notified  revised  Foreign  Direct  Investment  (FDI)  policy  on  various sectors including Defence. According to the new policy, FDI up to 49% is under  automatic  route  and  beyond  49%  is  through  government  route wherever it is likely to result in access to modern technology or for other reasons to be recorded.

2. Further,  Defence  sector  is  subject  to  industrial  licensing  under Industries (Development & Regulation) Act, 1951 and Arms Act, 1959 / Arms Rules, 2016. The licensing application under defence sector are examined and  deliberated  by  Licensing  Committee  headed  by  Secretary  (IPP)  in Department  of  Industrial  Policy  &  Promotion  (DIPP),  an  inter  ministerial body, which among other things, also takes into account security clearance by Ministry of Home Affairs (MHA) and views of Ministry of Defence (MoD).
3. As  regards  permitting  FDI  above  49%  in  the  case  of  access  to modern  technology  or  for  other  reasons  through  Government  route, Ministry of Defence takes security clearance of MHA while considering the proposal for foreign investment.
4. The  licensed  Defence  companies  are  required  to  follow  detailed security guidelines  applicable  to them  as  per  security  instructions  / architectures prescribed in 'Security Manual for Licensed Defence Industries' available at www.ddpmod.gov.in based on their categorisation. The  Manual  provides  detailed  guidelines  on  physical  security  /  materials security / documents security / information security etc. The companies are also subjected to external audit by Intelligence Agencies once in two years and cyber security audit by CERT-In empanelled auditors once every year.
5. The defence items as mentioned in the license, produced by such companies will be primarily sold to the Ministry of Defence. These items are allowed to  be  sold  to  other  Government  entities  under  the  control  of  the Ministry  of  Home  Affairs,  State  Government,  Public  Sector  Undertakings (PSUs) and other valid Defence Licensed Companies without prior approval of Department of Defence Production (DDP). However, for sale of the items to any other entity, the licensees are required to take prior permission from the Department of Defence Production, Ministry of Defence.

******