Defence acquisition: SJM seeks preference for firms with majority Indian stake

Applauding the government's decision to ban import of 101 weapons and platforms in a staggered manner, Mahajan said a foreign entity can get registered in India or buy majority stake in an Indian firm as up to 74 per cent FDI is allowed in defence under the automatic route.

This way, a foreign entity can avail the same 'special treatment' in defence procurement under the 'Buy IDDM (Indian Indigenously Designed Developed and Manufactured)' framework, which are supposed to be meant for Indian entities, Mahajan said.

Requesting that a preference in defence procurement should be given to Indian companies with Indian shareholding of 51 per cent or above, Mahajan said the the definition of 'Indian Vendor' in the proposed Defence Acquisition Procedure 2020 rules should be changed to ensure that foreign entities do not get any advantage over truly Indian entities.

He said the SJM is of the considered opinion that an 'Indian vendor' should only mean an entity in which the majority ownership and control is with Indian resident citizens.

Citing reports about any entity registered in India being considered an 'Indian vendor' for defence procurement, Mahajan said such a definition would cause a severe blow to the existence of the domestic defence industry, both big and small that has developed indigenously, as foreign companies would start getting the same treatment as the domestic industry.

"More importantly, the dream of self-reliance in defence production, which is so close to your heart, itself will die down. All the gains, which were expected by banning imports of 101 defence items would be squandered away, as foreign companies establishing their units, would be covered by procurement by the government as a domestic company," he said in the letter to Modi.

Last month, Defence Minister Rajnath Singh had announced an ambitious plan to ban import of 101 weapons and platforms by 2024 under a staggered timeline. The move is aimed at boosting India's domestic defence production in line with the prime minister's 'Self-Reliant India Mission'.