A boost for private-public partnership in defence sector
To strengthen tie-ups between defence public sector undertakings and their private partners, the Union Cabinet on Thursday approved guidelines for setting up joint ventures.
The move is expected to increase opportunities for the Indian private sector to obtain advanced technologies from foreign sources through adoption of appropriate partnership approaches by defence PSUs.
The formation of such joint ventures will be undertaken by the board-managed defence public sector undertakings within the framework of the guidelines, an official statement issued after the Cabinet meeting said.
Helping defence PSUs
It adds that the guidelines will provide a streamlined, fair and transparent framework for public sector defence companies for forming joint ventures.
This is with the ultimate aim of better risk management, greater efficiency, shorter time frames for delivery to meet the increasing demands of the armed forces. Industry watchers say the new guidelines are likely to help defence PSU companies.
“Government rules only allow 26 per cent foreign direct investment in the defence sector.
“Public sector companies are not too keen to create new companies holding majority shareholdings. The new guidelines will allow a domestic private sector company to tie up with a foreign private sector company and form a joint venture with the defence PSU,” a European defence company official said.
The guidelines retain the affirmative right of a defence public sector undertaking for prior approval to key joint venture decisions, such as amendments to the Articles of Association of the company, declaration of dividend, sale of substantial assets, and formation of further joint ventures/subsidiaries.
Exit provisions
The guidelines also provide exit provisions for the defence PSU and regular reporting and monitoring of the functioning of the joint venture company.
Official sources indicated that the detailed guidelines would be made available in the next few days.
policy to encourage self-reliance
It was in January 2011 that the Government issued the Defence Production policy with the objective of achieving substantive self-reliance in the sector.
To synergise and enhance national competence in producing advanced defence products in a globally competitive manner, the procurement policy allows for adoption of all viable approaches, such as formation of consortia, joint ventures and public-private partnerships within the Government-approved framework.
Keywords: Defence PSUs, joint venture companies, guidelines
