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Sunday , July 20 , 2014
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End of PSU hold over defence buys

New Delhi, July 19: Defence minister Arun Jaitley today ended public sector monopoly over aircraft assembly and signalled that the Indian Navy will operate three carrier battle--groups in waters beyond the Indian Ocean Region — such as in the South China Sea — supported by large auxiliary ships built in India.

The first meeting of the Defence Acquisitions Council (DAC) after the new government took over approved procurement programmes worth Rs 21,000 crore, with Jaitley also indicating that he hoped to end the tardiness in buying military equipment that the armed forces have complained of.

“There are many projects in the pipeline. We have tried to expedite quite a few of them today,” Jaitley said.

Two of the programmes — for light transport aircraft and for fleet support ships — are designed to attract private sector firms into defence production. “This (the light transport aircraft) project is going to be a significant project in which the private sector will be (the) sole player and it will lead to capacity-building,” Jaitley said after the DAC meet.

The IAF requires 56 light transport aircraft to replace its outdated Avros. Because it is a non-lethal platform, the selected foreign original equipment manufacturer (OEM) and its Indian partner agency (an Indian private firm) would also be allowed to sell the aircraft commercially for civilian uses, assuring it of orders beyond the limited requirement of the armed forces. The selected entity would have to establish a production facility with an adjacent airfield.

The programme was first approved by former defence minister A.K. Antony in May last year. But he froze it in December after his then cabinet colleague Praful Patel objected to the exclusion of the public sector Hindustan Aeronautics’ (HAL), which had monopoly over licence production of aircraft for the air force.

The IAF would initially enter into a contract of around Rs 13,000 crore. As of now, three Indian companies — Reliance, the Tata group and Mahindra — are known to have established aviation subsidiaries. In his budget last week, Jaitley, who is also finance minister, had lifted the FDI cap in defence from 26 per cent to 49 per cent.

The DAC also decided that the navy’s requirement for fleet support vessels would be met in the “buy Indian” category of the defence procurement rules, meaning that they would be domestically made. The five combat support vessels would be procured for Rs 9,000 crore.

Fleet support or auxiliary vessels are required to feed carrier battle-groups operating in “blue waters”, meaning in seas beyond the neighbourhood.

The perspective plan of the navy says the vessels — each displacing 40,000 tonnes (the INS Vikramaditya carrier displaces 44,000 tonnes) — will transfer personnel, food, FOL (fuel, oil and lubricants) to three carrier battlegroups it would operate in eight to 10 years.

The navy currently has two carriers — the INS Vikramaditya and the INS Viraat. (A third, the Vikrant, is being built at the Cochin Shipyard). Such a plan is a scaled-down version of the US’s expeditionary fleet-pattern navy.

The only yard that can build such large ships is currently in Cochin. But private sector companies such Larsen & Toubro, ABG and Pipavav would be invited to participate in the programme with the government deciding that the tenders would be given only to Indian companies.

The DAC also approved procurement from public-sector companies. Among this, the largest is Rs 7,000 crore, to buy 32 Dhruv helicopters from HAL for the coast guard and the navy. The cost also includes the development programme. Naval helicopters require foldable rotorblades because of constricted spaces on warships.

Other procurements approved include Rs 900 crore worth of search and rescue equipment for the army, navy and the air force; five fast patrol vessels for the navy for Rs 360 crore to be built by Garden Reach Shipbuilders and Engineers, Calcutta, and five offshore patrol vessels (Rs 2,000 crore) from Goa Shipyard for the coast guard.