FAQs on FDI in Defence Sector

A.1 DIPP vide Press Note No. 5 of 2016 Series dated 24.06.2016 notified review of Foreign Direct Investment (FDI) Policy on various sectors including which includes conditions related to FDI in defence at Para 5 of the said Press Note. According to the revised guidelines, Foreign Investment Cap upto 49% is allowed through automatic route and beyond 49% under Government route, wherever it is likely to result in access to modern technology or for other reasons to be recorded. The foreign investment in defence sector is further subject to industrial license under the Industries (Development & Regulation Act), 1951. The detailed guidelines in this regard may be seen under the Press Note available at DIPP website (www.dipp.nic.in followed by link Acts & Rules).
A.2 As per the guidelines notified vide Press Note 5 of 2016 Series dated 24.06.2016, infusion of fresh foreign investment in defence sector upto 49% is allowed through automatic route and beyond 49% under Government route, wherever it is likely to result in access to modern technology or for other reasons to be recorded. However for change in ownership pattern of transfer of stakes by existing investor to new foreign investor, Government approval will be required.
A.3 A company can apply online at Foreign Investment Promotion Board (FIPB) Unit, Department of Economic Affairs, Ministry of Finance website (www.fipb.gov.in) for obtaining necessary approval for entering into defence sector. The company may also visit DEA’s website for further details.
A.4 The Government route as notified in Press Note 5 of 2016 Series dated 24.06.2015 is an FIPB route. An investor has to seek approval for foreign investment in defence sector through FIPB Unit, Department of Economic Affairs, Ministry of Finance, North Block, New Delhi.
A.5 FDI in defence sector is allowed only for undertaking manufacturing of licensable defence items notified by DIPP vide Press Note 3 of 20104 Series (www.dipp.gov.in followed by Acts and Rules under Press Notes)
A.6 Manufacturing activity related to licensable defence items is only covered under FDI policy in defence sector which is further subject to obtaining industrial license under IDR Act, 1951.
A.7 The Ministry of Defence is not in a position to give purchase guarantee for products to be manufactured. However, the planned acquisition programme for such equipments and overall requirements would be made available to the extent possible.
A.8 Deputy Secretary(DIP), Room No. 8, H-Block, New Delhi [Tel: 91-11-23010518, Telefax: 91-11-2379 4687] At Joint Secretary level, work is being looked after by Joint Secretary (DIP), Room No. 134-B, South Block, New Delhi, [Tel: 91-11-23015574].