Will a ‘third wheel' help save a joint venture that Bharat Electronics Ltd has planned with Israel's Rafael Advanced Defense Systems for making missile seekers in the country?

According to BEL's new CMD, Mr Anil Kumar, the defence enterprise is open to allowing a suitable third partner in the long-stuck venture. It now expects the Israeli company to name a domestic player from the private industry so that it can sew up a new company.

If the three-way proposal clicks, BEL would hold 50 per cent, Rafael 26 per cent and the new Indian partner 24 per cent stake in the venture, Mr Anil Kumar, who took charge as BEL's chief executive in October 2011, told Business Line . An earlier estimate put the total investment in the range of Rs 300 crore.

A seeker is the on-board brain of advanced missiles. It detects and goes after hidden targets. It is also one of the most denied technologies. While present Indian missiles are guided by ground-based radars, upcoming missile projects would need to have indigenous seeker technologies.

The initial agreement was signed in 2008 but the joint venture was swaying over the equity issue. Rafael, among the handful of owners of vital missile technologies, apparently has not been comfortable with the idea of 74 per cent stake going to a PSU in the proposed venture. Current norms restrict foreign direct investment in Defence to 26 per cent. The Israeli company would have preferred a 50 or a 51 per cent stake for itself.

“[Rafael is] not comfortable with BEL holding 74 per cent equity in the joint venture. It fears that it would again become a PSU. It would not be so, but they don't buy it,” Mr Anil Kumar said. “This [three-way] plan was revived recently. What we have now discussed is, they can bring in a third partner who can take 24 per cent [of that 74 per cent.] But the partner should be acceptable to us, not be a sleeping one or a competitor. If this plan goes through, we will have a venture with Rafael for missile seekers.”

Mr Anil Kumar said missiles were among BEL's future growth areas along with homeland security, radars, electronic warfare and network-centric systems.

Defence research establishment DRDO - which also develops missiles that need seekers - lists this technology as a missing link in its arsenal of home-made products. Some of the newer missiles it is co-developing will use seekers. BEL and DRDO are also working at imaging infra-red seekers for the Nag anti-tank missile.

As for another pending joint venture to make radars and related technologies for the civil sector, he said, “We have almost finalised [the 74:26] venture with Thales of France but cannot go ahead with it until they release their guidelines. To me, it looks like it may not happen before March [2012.]”

> madhu@thehindu.co.in

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