The Telegraph
Friday , July 18 , 2014
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Meet set to end PSU grip on defence

New Delhi, July 17: Defence minister Arun Jaitley is likely to chair on Saturday his first acquisition council meeting that is expected, among other issues, to end public sector monopoly over aircraft assembly and integration.

The only company in the country that assembles aircraft through licence production arrangements is the Bangalore-headquartered defence public sector Hindustan Aeronautics Limited (HAL) that has a notorious record with delivery schedules but is overbooked with orders.

A new programme to replace the Indian Air Force’s light transport Avro aircraft could lead to the entry of one of three Indian majors — Reliance Aerospace, Tata Advanced Systems and Mahindra Aviation — into an arrangement with one of eight foreign vendors to make planes.

The eight firms have responded with bids for the Indian programme to make 56 light transport aircraft, 16 of which will be bought “off-the-shelf” for the IAF and 40 of which will be manufactured by the Indian Partnership Agency (IPA) in collaboration with the foreign original equipment manufacturer (OEM).

The foreign bidders are Ilyushin and Antonov (both Russian/Ukrainian), EADS Casa (A European consortium and Airbus affiliate), Embraer (Brazil), Alenia Aermacchi (Italy), Boeing and Lockheed Martin (US) and SAAB (Swedish).

The decision to open the programme to the private sector was taken last year but was frozen by then defence minister A.K. Antony in December after his cabinet colleague Praful Patel objected to the exclusion of the public sector.

The defence establishment has now come around to the view that the private sector can do the job because the project does not involve building a combat platform and the private sector can be assured of further orders for civilian uses.

The matter has gained some urgency now because the IAF has pointed out that the Avro planes — originally a British firm, that is of inter-war (1918-1939) vintage — are outdated and have to be phased out.

The Defence Acquisitions Council, chaired by Jaitley, will also consider proposals to acquire heavy artillery and a new standard issue assault rifle for the army, air defence platforms and a multi-utility helicopter for the navy.