DIPP Approves Defence Joint Ventures between FDI and Indian Majors

Giving a big boost to “Make In India”, the Licensing Committee chaired by Secretary, Department of Industrial Policy & Promotion has last week cleared 19 proposals for grant of Industrial License. These included applications for defence production from major players like, M/s Reliance Aerospace Technologies Limited, M/s Bharat Forge Limited, M/s Mahindra Telephonic Integrated Systems Limited, M/s Punj Lloyd Industries Limited, M/s Mahindra Aero Structure Pvt Limited, M/s Tata Advanced Materials Limited. Many of these proposals were pending in Government for last several years. It has been possible to approve these cases as consequence of the simplification of FDI policy vide Press Note 7 which has raised the FDI cap in defence from 26% to 49% and permitted portfolio investments upto 24% of the total equity of the investee / joint venture company under automatic route and doing away with requirement of 51% equity ownership by a single Indian investor/company.

In case of another additional 14 pending defence applications, applicants were informed that licenses were not required anymore as a vast number of defence items have been delicensed. Vide Press Note 3(2014), Defence Products list for industrial licensing have been issued, wherein large number of parts/components, castings/ forgings etc. have been excluded from preview of industrial licensing. Similarly dual use item, having military as well as civilian application (unless classified as defence items) do not now require Industrial License from defence angle. This has enabled domestic and international companies to undertake manufacturing without going through a lengthy process. The applicant company now only needs to file an Industrial Entrepreneur Memorandum (IEM) for these items and implement his project through the automatic route.

Government has taken a series of measures to improve the Ease of Doing Business in India. The emphasis has been on simplification and rationalization of the existing rules and introduction of information technology to make governance more efficient, effective, simple and user friendly. The measures include 24X7 availability of online filing of Industrial License(IL) and Industrial Entrepreneur Memorandum(IEM) applications, increasing initial validity period of Industrial License to three years, streamlining the processing of applications for grant of extension of validity of Industrial License, treating partial commencement of production as commencement of production for all the items included in the license, adoption of highly contemporary industrial classification code NIC 2008 in place of NIC 1987 and doing away with the requirement of affidavit from the applicants of Defence Industrial License, with the issue of the Defence Security Manual.