Wait Isn't Over for French Firm DCNS to Set Up Subsidiary in India

French company DCNS has once again been kept in the lurch while the Indian government takes time to decide whether its air-independent propulsion systems will be classified as “modern technology” as required by India's new Foreign Direct Investment policy.

New Delhi (Sputnik) — In a setback to French naval ship-building company DCNS; the Indian Government has once again deferred its decision on allowing the company to set up its subsidiary in India to manufacture air-independent propulsion systems (AIPS) for submarines. This comes despite the Indian government's latest move to further liberalize its foreign direct investment (FDI) policy.

In a statement issued after a meeting of the Foreign Investment Promotion Board, the Indian Ministry of Finance said, "Decision has been deferred on an approval sought by DCNS to set up a company in India (IndiaCo) for the purposes of conducting the business of undertaking design and industrialization studies, research and development activities and manufacturing and maintenance in relation to air independent propulsion systems for submarines."

This is the second time when the board has deferred the decision on the subject. Air independent propulsion systems are an expensive item which can be retrofit in old ships to enhance the survivability of the submarines. It uses limited amounts of stored liquid gas which ultimately is used to charge the battery of the submarines. Due to this, submarines can remain in water for longer periods. Otherwise, submarines have to come back to the surface to charge their batteries.

Last month, India permitted foreign investment beyond 49% with government approval, but only in cases resulting in access to modern technology in the country or for other reasons to be recorded. Sources says that Ministry of Defense is yet to firm up its mind whether DCNS' proposal entails access to modern technology or not.

It is said that Germany and Sweden have the best AIPs, while India itself is working on developing modern AIPs. In March this year, the Department of Industrial Policy and Promotion approved issuance of a license for manufacturing AIPs to Anil Ambani led Reliance group of India.