In a meeting chaired by Indian Prime Minister Narendra Modi, the Union Government has radically liberalized the Foreign Direct Investment(FDI) regime today, with the objective of providing impetus for employment and job creation in India.
Opportunities in Aviation and Defence Sector in India:
The aviation and defence sector in India present umpteen opportunities under new FDI regime. The initiatives of Government of India to attract Industry to participate in developing a growing domestic industry (manufacturing and services) has opened new doors for the players (domestic and foreign) to explore opportunities in these sectors in India. The Defence Procurement Procedure 2016, presents new cooperation platforms for promoting indigenization in a big way. India's National Civil Aviation Policy (NCAP) is well-intentioned and is a step in the right direction for achieving overall growth of the sector in a structured manner. There is an increased mutual awareness between Government and Industry for each other's requirements, capabilities and concerns.
FDI in Civil Aviation Sector:
The extant FDI policy on Airports permits 100% FDI under automatic route in Greenfield Projects and 74% FDI in Brownfield Projects under automatic route. FDI beyond 74% for Brownfield Projects is under government route.
With a view to aid in modernization of the existing airports to establish a high standard and help ease the pressure on the existing airports, it has been decided to permit 100% FDI under automatic route in Brownfield Airport projects.
As per the present FDI policy, foreign investment up to 49% is allowed under automatic route in Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and regional Air Transport Service. It has now been decided to raise this limit to 100%, with FDI up to 49% permitted under automatic route and FDI beyond 49% through Government approval. For NRIs, 100% FDI will continue to be allowed under automatic route. However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and nonscheduled air transport.
Up to 100%, FDI will be permitted in Defence sector in India:
Present FDI regime permits 49% FDI participation in the equity of a company under the automatic route. FDI above 49% is allowed through Government approval on the case to case basis, wherever it is likely to result in access to modern and 'state of art' technology in the country. In this regard, the following changes have been brought in the FDI policy:
Foreign investment beyond 49% has now been allowed through government approval route, in cases resulting in access to modern technology in the country or for other reasons to be recorded. The condition of access to 'state of the art' technology in the country has been done away with.
FDI limit for defence sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.
Establishment of branch office, liaison office or project office:
For establishment of branch office, liaison office or project office or any other place of business in India if the principal business of the applicant is Defence, (Telecom, Private Security or Information and Broadcasting), it has been decided that approval of Reserve Bank of India or separate security clearance would not be required in cases where FIPB approval or license/permission by the concerned Ministry/Regulator has already been granted.
Legal Services in Aviation and Defence Sector:
The Industry is still apprehensive about protocol and processes in their interaction/association with Government regarding opportunities/assignments in these sectors. The Industry has consistently raised its concerns regarding lack of information on the policies and procedures. This lack of clarity in the policy and procedures, not only makes it difficult for the Industry to prepare its business plan, annual budgets, manpower estimations, expansion plans etc but also act a deterrent for a large number of organisations.
Lawyers who understand the realities of the sector and have the requisite experience in dealing/interacting with the Government departments can not only assist the Industry in understanding the policies and procedures but can also advice/help in putting in place appropriate policies and strategies to translate business opportunities into actual assignments.