Foreign Direct Investments (FDI) in Defence & Aerospace in India-1: Lawyers Advice
Entering the Indian Market:
• The Aerospace and Defence (A&D) market in India is estimated to reach around $70 billion by 2030 as the momentum is expected to further pick up with improving infrastructure and government thrust.
• FDI Policy allows 100% investment in the Defence in India wherein 49% can be invested through the automatic route and any investment beyond 49% has be done with the prior approval of the government and Reserve Bank of India.
• Tamil Nadu
Achievements made by Indian Corporations or in India:
• Goa Shipyard Limited has delivered Naval Offshore Patrol Vessels, Fast Patrol Vessels for the Indian Navy and Coast Guard.
• The Bharat Dynamics Limited developed Long Range Surface to Air Missile for the Indian Navy and tested Anti-Tank Guided Missile
• The Mazagon Dock Shipbuilders Limited launched the Visakhapatnam Class Destroyers and commissioned the INS Kalvari, the Scorpene class Submarine.
• During the last three years and current year, 119 contracts involving Rs. 1,16,522.89 crore have been signed with Indian vendors and 68 contracts involving Rs. 1,24,291.33 crore have been signed with foreign vendors for capital procurements of defence equipment.
Demand in the Market:
• India’s defence budget has seen an increased from Rs 3,40,921.78 crore in 2016-17, to Rs 4,31,010.79 crore in 2019-20.
• Indian market has seen a competing demand for modernized and sustenance. India has initiated efforts to achieve US$ 26 billion defence industry by 2025, therefore one can expect a steep growth in the demand of defence products in India.
Existing Notable Players in The Indian Market-Domestic & Foreign:
• Hindustan Aeronautic Limited
• Kalyani Defence Systems
• Bharat Electronics Limited
• Airbus Defence And Space
• BAE Systems
• Pilatus Aircraft
• Industries (Development And Regulation) Act, 1951 (IDR ACT): Manufacturing in the defence industry requires industrial license as per the Act. Vide Press Note 3 of 2014, the Government has provided a consolidated list of items requiring Industrial License.
• Defence Procurement Procedure, 2016: The Defence Procurement Procedure is a set of guidelines approved by the Defence Acquisition Council that govern capital procurements in terms of defence equipment, manufacturing capabilities and technology.
• Indian Army Act, 1950; Indian Air Force Act, 1950; Indian Navy Act, 1957: Statutory provisions and supplementary rules concerning government, regulation, administration, enrolment and discipline of the Army, Air Force and Navy.
Documents and Agreements:
• Registration Documents showing whether it is a large scale enterprise or a MSME
• Relevant Document showing nature of company being Proprietary, Private Ltd, Public Ltd, Partnership, etc.
• Copy of Valid State, Central Sales Tax Registration Certificate
• Pollution Clearance Certificate from State Pollution Control Board;
• Documents showing facilities for Water, Fire Fighting, Security & Medical.
• Details with relevant certificates and documents in regard of the inspection and quality control of raw material, components, semi-finished goods, assemblies, etc.
Self-attested copies of Audited Balance Sheet, and total Accumulated losses, present net worth, Attach copy of PAN/TAN/ Service Tax/ VAT/ GST/Income Tax Certificate for past 3 years.
Authored By: Adv. Anant Sharma