Privatisation, PPP or FDI in Railways and Defence – NCJCM Standing Committee Decision

Privatisation, PPP or FDI in Railways and Defence – NCJCM Standing Committee Decision

Minutes of Meeting of Standing Committee

S.No.4 – No privatisation, PPP or FDI in Railways and Defence Establishments

Ministry of Railways had vide their O.M. dated 14.02.2017 intimated that following a meeting between Railway Minister and the highest office-bearers of AIRF and NFIR on 18.12.2014 on FDI and other issues, a Standing Committee has been set up to discuss and suggest ways of generating resources towards improving the financial health of Indian Railways. Following two more meetings on 20.07.2015 and 29.07.2015, the terms of reference have been expanded by adding the words “and productivity of Indian Railways”.

Members of Staff-Side rebutted that the reply of Ministry of Railways was not correct as the committee is not looking into the point raised in this agenda item. At this point, Chairman asked the representative of Ministry of Railways to share the terms of reference of the said Committee with the members of Staff Side.

On the point related to Ministry of Defence (MoD), the representative of the Ministry shared a Note on the ‘Status of FDI in Defence Sector’. As per the Note, defence manufacturing sector was opened for the first time in 2001 for 100% private sector participation including FDI. In 2001, the FDI upto 26% was allowed under the Government route (FIPB approval). Since then, the policy has been revised several times. The FDI Policy for defence sector was last revised in June 2016. As per the revised policy, FDI upto 49% is allowed under 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. FDI policy for defence is applicable to defence industry subject to Industrial Licence under the Industries(Development & Regulation) Act, 1951. The Policy is also applicable for manufacturing of small arms and ammunition under the Arms Act, 1959.

He clarified further that this sector badly needs capital investment and infusion of technology for which foreign investment can play a significant role. Investment promotion and technology transfer being of prime concern, Government believes that the amendments made in the policy could be the most trusted route to technology transfer which would help in increasing the defence production base and providing the much-needed impetus to self-reliance and indigenisation in defence sector.

Members of the Staff-Side stated that the present Policy is likely to impact the existing Defence Establishments like DRDO and Ordnance Factories. The recent decision of DDP to outsource 143 products produced by ordnance factories would affect the existence of the organization and its employees. This is against the assurance given by the Ministry of Defence that the products already being produced by ordnance factories would not be outsourced and, for any new products, ordnance factories would be given first preference. However all these major policy decisions were taken without any discussion with the Staff Side and without hearing their view points.

It was decided that the Ministry of Defence would be requested to hold discussion with the Staff side on the subject matter and accordingly the issue would be referred to Ministry of Defence.

It was decided that the item may be treated as closed.

{Action: M/o Railways, M/o Defence}

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