Automotive giant Mahindra and Mahindra has decided to seek clarification from the Government on why the Foreign Investment Promotion Board had rejected its proposal to enter into a joint venture with Rafael Advanced Defense Systems of Israel.

The proposed investment of around $18.2 million to develop and manufacture naval systems also remains scuttled.

Both the companies have said they are keen to establish a joint venture in the country.

In March last year, Mahindra and Mahindra (M&M) and Rafael Advanced Defense Systems, a manufacturer of high-tech defence systems for air, land, sea and space applications, signed an MoU in preparation for a joint venture company in India. The venture was to develop and manufacture anti-torpedo defence systems, electronic warfare systems, advanced armouring solutions and remotely operated weapon stations for futuristic infantry combat vehicles, amongst others.

The companies had approached FIPB in March, for approval of the development and production of naval system products, and for the creation of a 74:26 joint venture company. However, the FIPB rejected the proposal, without assigning any reason. An official close to the situation, on condition of anonymity, said “On the basis of the joint venture, Rafael was to make investments in Mahindra’s existing naval systems division in Pune. Talks were also on to set up a production facility at the same location, which would enable the company meet long-term requirements of the proposed joint venture”.

The official added that Rafael was established as part of the Israeli Ministry of Defence more than 60 years ago. The company’s technology is embedded in almost all the Israel Defence Forces systems in operation today. In a statement, the companies said, “Both Mahindra and Rafael are surprised and disappointed at this decision, as both are reputed companies which have extensive engagement with the Government of India on projects related to defence and homeland security. Mahindra and Rafael shall continue exploring ways towards the establishment of a joint venture”.

Incidentally, the Government of India and the Government of Israel have extensive cooperation in the defence arena.

amritanair.ghaswalla@thehindu.co.in

(This article was published on January 1, 2013)
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