The Hindu Business Line : Kelkar panel's defence report to be out soon

THE Union Defence Minister, Mr Pranab Mukherjee, said on Tuesday that the final report of the Vijay Kelkar committee on the integration of the defence sector and the Indian industry is expected at the end of the month or early next month.

In its final report, the committee will recommend measures for private participation in defence production and explore the modalities of modernising the 39 ordnance factories.

Addressing a meeting at the Bengal National Chamber of Commerce and Industry on defence procurement from small and medium enterprises, the Minister said, despite opening up the sector in May 2001, the Defence Ministry is yet to get a response from the private sector.

Apart from domestic investment, the Centre has also allowed up to 26 per cent FDI for defence production.

"So far, we have received 27 letters of intent. Except for two proposals from the Tata group and L&T, there has not been much progress on the issue," the Minister said.

"The Kelkar committee is now exploring the reasons behind the lack of interest and will suggest the remedies," Mr Mukherjee said.

According to him, of the total defence budget of Rs 83,000 crore for 2005-06, roughly 40 per cent would be spent on platform and equipment.

Though the Ordnance Factory Board and eight defence PSUs would supply equipment worth about Rs 17,000 crore, there is still much room left for imports.

This, through private participation, would bolster the domestic economy.

Referring to the recent defence framework for cooperation with the US, Mr Mukherjee said, to avoid uncertainty in procuring major platforms and systems, India had shifted focus to co-production and co-development of major systems.

This would also pave the way for technology transfer and private participation through the joint venture route.

"We are working towards entering into a similar frameworks for cooperation with France and Russia.

"Both the countries have already agreed on this," Mr Mukherjee said.

India had such a technology transfer treaty in place with the erstwhile USSR, which lost its relevance following the disintegration of the union, he added.

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