Govt. clears guidelines for private participation in Defence sector

THE government has cleared guidelines for defence public sector undertakings (DPSUs) to set up joint ventures (JVs) with private companies. The guidelines were necessitated after a venture between government's Mumbai-based shipyard Mazgaon Dock Limited (MDL) and Pipavav, a private ship building entity, was put on hold following allegations of irregularities by rival firms.
The Union Cabinet has approved the new codes, which would drive the joint venture policy from now onwards. Even the MDL-Pipavav deal will have to be reviewed to see if it fulfilled requirements as per the new rules. The need to look for private partners in the defence sector was felt as the industry is expanding rapidly. Government companies did not have the capacity to absorb the growth and private base has been non-existent in the country.
The basic principle of a JV in the sensitive would be national security. It called for maintaining fairness and transparency in selecting the partner and ensuring a well-defined nature and scope. The affirmative right would be retained by the public sector undertaking for approving key JV decisions. The DPSUs would also have the exit provisions and there would be regular reporting and monitoring of the functioning of the JV company.
The DPSUs were allowed to look for private partners only last year to achieve self-reliance in defence production. India meets its defence requirements through substantial assistance from abroad. The Policy of 2011 called for greater stress on indigenous production.