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Govt invites bids from pvt firms for defence production

Shahid K Abbas

Defence Minister George Fernandes on Thursday told the Rajya Sabha that the government has invited proposals from private entrepreneurs for production of arms, ammunitions and other defence equipments.

"The defence sector has been opened up for 100 per cent private participation with 26 per cent foreign direct investment. However, the operations of the Indian as well as the foreign companies are subject to government approval," the minister said in a statement.

He said that guidelines have been issued by the department of industrial policy and promotion in consultation with the ministry of defence regarding the modalities for consideration of applications for grant of license.

As per the guidelines the private companies are allowed to either apply on their own or as a partnership firm, wherein the chief executives of the company/parternship firm must be resident Indians.

Preference would be given to original equipment manufacturers or design establishments and those having a good track record of supplies to the armed forces, the minister said.

However, there would be a three-year lock-in period for transfer of equity from one foreign investor to another.

According to the minister, the licensees would be required to put in place adequate safety and security procedures which would be verified by authorised government agencies. The quality of the products would be established by the quality assurance agencies of the ministry of defence.

At present, Fernandes said, the government policy, operative up to March 31, provides only for purchase of goods and services from the central public sector enterprises.

Asked if the public sector Hindustan Aeronautics Limited is planning to offload 25 per cent of its work-load to the private sector, the minister clarified that HAL was making efforts to increase the level of out sourcing to 20 per cent by the end of the Tenth Plan.

He informed that no offer to offload 25 per cent of its work-load has been made.

He said that HAL would mostly outsource components for airframe, engines and accessories, but any agreement or contract to this effect is yet to be signed.

In a separate statement regarding the phasing out of the MIGs by HAL, the minister said that the company was not in a position to decide on such matters, be they MIGs or any other aircraft. Decision about phasing out of defence aircraft can only be taken by the Indian Air Force in consultation with the defence ministry.

HAL, he explained, was responsible only for manufacture, upgrade, repair and overhaul of aircraft.

While HAL continues to upgrade MIG-21s and MIG 27s, the manufacture of these fighter aircraft has been discontinued since 1987 and 1997, respectively, the minister said.

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