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Govt steps up reforms, raises FDI limit in defence, opens up railways

NEW DELHI: French aircraft giant Airbus is likely to tie up with the Tatas to manufacture transport planes for the defence sector , sources familiar with the development told TOI.The planned partnership is likely to mark the first big-ticket entry after the Narendra Modi government raised the FDI limit in defence production to 49% from 26% to boost domestic manufacturing and reduce outgo of foreign exchange.The proposed entry of Airbus in partnership with the Tatas puts at rest doubts that were expressed when the sector was opened up. The government had faced criticism for not allowing majority control for foreign partners and there was an apprehension that global majors might stay away.India Air Force has plans to replace its Avros aircraft, and the Airbus-Tata combine is one among several groups that are expected to bid for the contract. An email sent to a Tata Sons spokesperson did not elicit any response.Several Indian companies ranging from Mukesh Ambani's Reliance Industries to the Mahindras and Bharat Forge have entered the defence industry but the Tata Group seems to have taken an early lead in a segment hitherto dominated by imports.The government has embarked on a “Make in India” campaign to ensure that the country emerges as a global hub for low-cost quality manufacturing; the defence sector is a key element in this strategy.In August the Union cabinet approved raising the FDI in the sensitive defence sector and opened up railway infrastructure to foreign firms. The cabinet had also decided that FDI beyond 49% would be allowed in state-of-the art defence equipment manufacturing, with technology transfer under Indian control and management.Technically, this means 100% FDI is allowed, but sources said this has been the position since 2002. As a safeguard, the Cabinet Committee on Security will approve such proposals. Sources also said that FDI up to 24% would be allowed via the automatic route.Headquartered in Toulouse, Airbus has had close links with India, a key market for planes, for a while now. In 1988, Airbus struck a deal with Hindustan Aeronautics Limited for the Indian PSU to manufacture passenger doors for the A320 aircraft. In addition, Airbus India Engineering in Bangalore employs 350 local engineers working in engineering design and innovation activities; the number working directly or indirectly on Airbus programmes has reached some 5,000 Indian jobs, according to the company’s website.Tata Advanced Systems Limited (TASL), a wholly-owned subsidiary of Tata Sons, is the strategic aerospace and defence arm of the Tata group. It has a tie-up with US helicopter manufacturer Sikorsky.