New Delhi: The permission sought by Wipro to Foreign Investment Promotion Board (FIPB) to design, develop and manufacture defense related items has given rise to policy issues. The govt. is in a tizzy now regarding IT service companies who want to get into military related software activities. The issue being if the companies will be subjected to the general stipulation of 26 percent cap on FDI in the defense sector or not, reports Surajeet Das Gupta of Business Standard.
Wipro has been advised by the Defense Ministry to take the FIPB permission before it applies for license. Present FDI norms grant software companies to set up shop in India directly if they have 100 percent foreign equity. However no clause exists to stop them from providing software services to the defense sector.
But to add twist to the tale here, a separate rule exists for FDI in the defense sector where only 26 percent cap is allowed and subject to industrial license.
Further FIPB states that it is not clear if software companies doing defense sector job require its approval or not. It directed the Department of Industrial Policy and Promotion and Ministry of Defense(MoD) to expeditiously conclude their discussions on this issue. The matter has been listed for an FIPB meeting this Friday.
Wipro's list of services that it wishes to offer include design, development, assembly and upgradation of warfare enablers, including strategic communication systems, design and development of computer-based simulators, radar avionics systems and military control systems, among others.