HindustanTimes Thu,18 Sep 2014

Defence ministry may ease norms for pvt players

Rahul Singh, Hindustan Times  New Delhi, February 22, 2013
First Published: 01:14 IST(22/2/2013) | Last Updated: 02:04 IST(22/2/2013)

The defence ministry is weighing proposals to give impetus to indigenisation of defence production by easing norms for private players.


Following the storm over the alleged kickbacks in the Rs. 3,760-crore AgustaWestland VVIP chopper deal, defence minister AK Antony said on Wednesday that reducing dependence on foreign vendors could help tackle corruption.

A South Block source said the first step would be to streamline the process of granting licences. The more than 300 firms awaiting licences say the regulatory mechanism is a nightmare.

The ministry is likely to make some changes in the tendering format and specify the technologies needed to be brought in. “If the ministry spells out the technologies to be transferred at the tendering stage, private players will benefit,” said an industry captain.

It is compulsory for foreign vendors to invest 30-50% of the value of contracts worth more than Rs. 300 crore in India. “If investments and transfer of technology are not clearly specified, Indian players will end up doing nuts and bolts kind of work,” he said.

Tax concessions may also be given to private players considering the long gestation period for defence projects.

India will float a global tender soon to replace the ageing Avro transport fleet of the air force. The ministry hopes the private sector will benefit as the shortlisted foreign vendor will have to supply 16 planes in fly-away condition, while 40 will be licence-produced by a private player.

But the private sector is not really enthused. Several industry leaders said it made no business sense to invest more than $1 billion to build just 40 planes.

"That investment will bring returns only if 120-150 planes are to be built. The ministry should consolidate its future requirements rather than place piecemeal orders," said another corporate leader.

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