Dr. Murli Manohar Joshi on Proposal to remove Foreign Ownership (FDI) cap on Private Security Agencies A serious threat to National Security

Press Statement issued by Dr. Murli Manohar Joshi on Proposal to remove Foreign Ownership (FDI) cap on Private Security Agencies A serious threat to National Security


Recent reports in financial dailies regarding the recommendations by Mayaram Committee, Department of Economic Affairs, Ministry of Finance regarding removal of foreign ownership cp on sectors with implications on national security is a cause for serious concern. It is disappointing to note that the Hon'ble Finance Minister, who has held charge of Ministry of Home Affairs in the recent past and is well informed about these concerns; has chosen to endorse the Mayaram Committee report in the garb of 'liberalizing the FDI regime' and forwarded the recommendations to Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce, for changes in the consolidated FDI policy.

I would particularly like to draw attention to the proposal for changing the FDI / foreign ownership cap on Private Security Agencies sector from current 49% to a100%. Thereby, allowing foreign nationals 100% ownership & control private security agencies.

Private Security sector in India is governed by the Private Security Agencies (Regulation) Act (2005) and overseen by Ministry of Home Affairs, Government of  India. The PSAR Act, 2005, clearly stipulates majority Indian ownership and control as a precondition for issue of license to operate private security business in the country. Clause 6 Sector 2 of the Act, copy enclosed refers.

Further, when the said Act was presented on the floor of the parliament by the then Hon'ble Home Minister, Shri Shivraj Patil, he had placed on record that the principal objective of the Private Security Agencies (Regulation) legislation is to check the proliferation of foreign owned and controlled private security agencies in the country, in view of national security concerns. The same is also recorded in the statement of objects of the Act, copy enclosed for reference.

Attempt to amend the FDI Policy for the Private Security sector through DIPP, Ministry of Commerce without taking cognizance of the federal legislation (PSAR Act - 2005) and without any consultation with the Parliamentary Standing Committee on Home Affairs is not only a serious technical anomaly with legal implications but also against parliamentary protocols.

Further, I would like to draw reference to the recent discussions in Parliament regarding illegal phone tapping case, where the involvement of rogue elements in private security sector who misused their expertise and technology to illegally tap phones was thoroughly exposed. In fact, the Ministry of Home Affairs was urged to design provisions for greater regulation and control over the private security and detectives industry to prevent such misadventures.

It need not be emphasized that any change in regulation that enables foreign nationals or foreign companies to directly own and control private security & detective services agencies in the country can pose to be a serious threat to national security. Particularly, when these agencies directly control over 50 lac workers in the country who are deployed at highly sensitive sites and also have access to technological equipment's that could be misused by foreign entities to compromise national security.

Over the years, as the state police departments and other government security agencies have been more focused on counter terrorism and serious law & order challenges, the private security agencies have played a prominent role in securing our cities including residential complexes, shopping malls, cinemas, metro stations, toll ways, fuel stations, bank, corporate offices and other public infrastructure. Similarly engagement of CISF in aviation security function and other critical duties has left a serious vacuum in area of Industrial security which has been taken over by these private security agencies.

Industry estimates that there are over 50 lacs private security personnel across the country who are engaged in watch and ward function at thousands of establishments including government organizations and sites of strategic significance like CSIR labs, DRDO complexes, private ports, oil refineries, power projects, gas pipeline, private airports, IITs/IIMs and even national monuments like the Red Fort and Qutub Minar. It is beyond understanding how the Government of India is willing to allow 100% foreign ownership and control of such private security organizations.

Moreover, it is widely known and reported in the media that Ministry of Home Affairs is actively considering a proposal to allow Private Security Agencies holding valid licenses under PSARA Act (2005), to obtain firearms for security of their clients, particularly, bank establishments and industrial sites. In such a scenario, it is even more dangerous to allow foreign ownership and control of such licensed private security agencies that will wield firearms in large numbers across the country.

Further, it is difficult to understand the rationale of FDI in Private Security sector and that too by circumventing the PSAR Act (2005). This manpower intensive sector has thus far attracted less than US$ 50 million worth of foreign investment (2005 - 2013) and by any stretch of imagination, allowing 100% FDI in the space shall not yield any significant gains in  terms of foreign investments in the country.

Based on the above, it is apparent that the proposal for change in FDI cap in Private Security sector is an ill-conceived idea that could result in compromising the nation's security for no significant gains in terms of foreign investment inflows. Moreover, any such move warrants an amendment to the Private Security Agencies (Act) of 2005.


In view of above, I sincerely urge the Prime Minister to sent the recommendations of the Mayaram Committee, DEA, Ministry of Finance regarding the Private Security sector, aside. The Department of Industrial Policy & Promotion (DIPP) should refrain from any changes in the FDI Policy for Private Security sector. The Parliamentary Standing Committee on Home Affairs should take immediate notice of the proposed circumvention of the PSAR Act and advise the government about the dangers of tampering with the present provisions of the PSAR Act with regard to the removal of FDI cap on foreign security agencies.


Latest News