Union Heavy Industries Minister Praful Patel has written to Prime Minister Manmohan Singh and Defence Minister AK Antony questioning the Defence Ministry’s decision to keep out PSUs from bidding for a Rs 12,000 contract for manufacturing 56 transport aircraft for the IAF.
Antony has asked his officials to examine the issues raised by Patel who has demanded level-playing field for PSUs. The Defence Ministry had cleared the project earlier this year as a test case to boost the nascent Indian private defence industry.
Moreover, the only defence PSU Hindustan Aeronautics limited (HAl) is already overburdened with several projects like manufacturing Jaguars, SU-30S, Hawk advanced jet trainers, MIG-21s besides Dhruv advanced light helicopters. The aviation giant is also shortly going to start joint production of medium transport aircraft in collaboration with Russia.
In his letter written to Singh and Antony on October 7, Patel said many PSUs meet all the prescribed criterion for participating in the tender for supply of 56 aircraft to replace the ageing Avros now in the IAF fleet.
Patel, who also holds the Public Enterprises portfolio, said “there are many PSUs who meet all the prescribed criterion for participating in this tender, but are being denied the opportunity to participate in this tender only because they are PSUs.”
Demanding level playing field, he also said “this being a Government / public procurement, an equal opportunity and level-playing field is required to be provided to all capable entities irrespective of being ‘Public’ or ‘Private’ in nature. This will also encourage healthy competition.”
Pressing the case for PSUs, Patel said extensive facilities, infrastructure and capabilities of these PSUs were created over a period of time through Government investments. These PSUs have also gained invaluable experience as well as expertise in this area, he added.
Appreciating the policy of encouraging private sector participation in defence sector, Patel, however, said “any preference/discrimination among potential Indian entities-Public or Private is likely to be construed as an act against spirit of public procurement particularly when capable PSUs are available to participate in this tender whereas there is no private company presently capable to undertake this work.”
Reacting to the objections raised by Patel, the Defence Ministry said on Wednesday it was in receipt of a letter from Patel. “Antony has asked the Defence Ministry officials to examine the issues raised by Patel,” the Ministry said in a statement.
The decision to invite only private players for this contract was taken in a Defence Acquisition (DAC) meeting chaired by Antony and subsequently a global tender was issued in May.
The tender specifications stipulated that Indian private industry will be the main bidders and they can tie up with foreign aerospace giants for manufacturing 40 aircraft in India. The first 16 aircraft will be bought off the shelf from the foreign partner and the remaining aircraft will be manufactured within the country by the Indian vendor.
The foreign vendor will have to plough back at least 30 per cent of the contracted amount to the Indian defence industry to fast track development of indigenous aerospace industry.
Eight foreign vendors including lockheed Martin (US), Saab (Sweden), Rosoboronexport (Russia), Airbus Military (Spain), Alenia (Italy) and Embraer (Brazil) have shown interest in the contract.
Since no Indian company has so far come forward to tie with them, the Defence Ministry extended the time limit for responding to the tender after the limit expired last week, sources said.
Explaining the reason for extending the time limit, officials said since it is the first tender of its kind inviting private industry, the Government wants to give more time to the local players to take part in the bidding. Indian companies like Tata, Mahindra Defence Systems, Reliance Industries and l & T were expected to bid for the programme.
Officials also said the new Defence Procurement Policy (DPP) announced two months back stresses on increasing the role of the Indian private sector in defence production and enable them to acquire cutting edge technology from foreign partners.