New Delhi. In a move to boost the defence sector, the government is likely to hike Foreign Direct Investment (FDI) to 74 per cent from the existing 49 per cent and boost local production of armaments and cut down on imports.

The Department for Promotion of Industry and Internal Trade (DPIIT) and the Defence Ministry are in talks to ease many conditions to encourage foreign investors to set up shop here.

It may also restructure the offset and export policies. “Discussions are on over further liberalisation,” sources said.

“We are examining what we can offer. What kind of relaxation can be taken up,” the sources said.

In the defence sector, any foreign investor proposing to set up a manufacturing base here requires a license and a procurement order from the government. Clearance for the license is needed from both the defence ministry and DPIIT. This makes duplication of work and experts believe it can be subsumed into one.

With regard to the offset policy, changes such as allowing a group company’s offsets also as part of the company placing the order could be considered. Under the defence offset policy, the foreign supplier has to source or purchase at least 30% the contract value locally.

The government may also ease the export policy for foreign defence manufacturers looking to set up base here. Some conditions specified in the license may be relaxed like allowing exports to other countries, barring enemy nations.