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Govt revises rulebook to allow private firms to produce weapons

PW Bureau

The new guidelines will empower the MoD to handpick a private entity for contracts in which a weapon system is to be mass produced in India after the technology is procured from an international firm New Delhi: With a new set of guidelines, the defence ministry has given itself the power to select a private player on the basis of qualifying criteria for the production of weapons being bought from a foreign vendor under a transfer of technology (ToT) pact.

Another PSU fiefdom lost

The new guidelines issued under the defence procurement policy have opened up what in the past had been a bastion of public sector undertakings (PSUs) that were automatically designated as the nominated production agency for ‘Buy and Make’ category of purchases. Interestingly, the new rulebook has come to light after much backlash has been generated on the Rafale deal being routed to Reliance Defence Limited which was registered 13 days before the agreement was announced.

Interestingly, the new rulebook has come to light after much backlash has been generated on the Rafale deal being routed to Reliance Defence Limited which was registered 13 days before the agreement was announced.

Although even before the guidelines were issued, there was no bar on the entry of private sector companies into such contracts, but laying down the ground rules for the same will allow the government to pick a private firm for a contract in which a weapon system is to be mass produced in India after the technology is procured from an international firm. In the past, such contracts, for instance, the Kamov 226 helicopter program and the aborted deal for Medium Multi-Role Combat Aircraft (MMRCA) that had been won by Dassault’s Rafale, were routed to state-owned enterprises that were chosen as the production agency.

The eligibility criteria

According to the new guidelines, Indian companies would need to have a minimum of two years of experience in the sector, should be engaged in manufacturing and should be controlled by Indian citizens to be eligible for consideration. As far as the financials are concerned, the government stipulates that the turnover of the companies should not be less than 10 percent of the estimated project cost for the past two years and that none of its records should show it or its directors as a ‘wilful defaulter.’ “The contract in buy and make category is placed on a foreign firm. The TOT (transfer of technology) is then transferred to a production agency in India by the vendor (sic). Since the technology is being acquired along with the procurement of defence equipment, the same is directly or indirectly financed by MoD and hence the decision to transfer the technology has to be done in a fair and transparent manner,” the new guidelines said.