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The government on Thursday paved the way for defence public sector undertakings (PSUs) to go for joint ventures (JVs) or form consortia with private sector companies.
Last year, a policy to this effect was held back on allegations over Mazagon Dock’s deal with Pipavav Shipyard to build warships. The deal had hit a road block after two other bidders, ABG and L&T, had raised questions on the selection process. Following the controversy, the defence ministry had put the joint venture on hold.
The Cabinet approved the guidelines for the joint ventures to bring fairness and transparency in the selection of the partner and ensure a defined nature and scope of the joint venture. The step is aimed at harnessing the dynamism of India’s private sector and the increasing opportunities to obtain advanced technologies from foreign sources through appropriate partnership appr-oaches by defence PSUs.
According to the guidelines, the prior approval of the defence PSU would be required for key decisions in the JV company. These include amendments to the articles of association of the company, the declaration of dividend, the sale of substantial assets and the formation of additional subsidiaries.
The government has said to synergise and enhance competence in producing state-of-the-art defence products in a globally competitive manner, the policy allows adoption of viable approaches such as formation of consortia, joint ventures and public private partnerships within the government-approved framework.
The guidelines provide a “streamlined, fair and transparent framework for the signing of JVs by defence PSUs, with the ultimate objective of better risk-management and shorter time frames for delivery to meet the increasing demands of our armed forces.” The new framework would also help in enhancing self-reliance in the defence sector.
The guidelines also mention the exit provisions for the PSUs and also call for regular reporting and monitoring of the functioning of the JV company.