Cabinet approves guidelines for defence hardware JVs

February 9th, 2012 - 3:57 pm ICT by IANS  

Manmohan Singh New Delhi, Feb 9 (IANS) Even as the vexed issue of foreign direct investment (FDI) in India defence sector hangs fire, the cabinet Thursday approved guidelines to facilitate the formation and regulation of joint ventures (JVs) between the private sector and the defence public sector undertakings (DPSUs).

“The objective is to have better risk-management, greater efficiency, shorter time frames for delivery to meet the increasing demands of the armed forces, and for enhancing self-reliance in the defence sector as a whole,” a statement issued after a cabinet meeting chaired by Prime Minister Manmohan Singh said.

Among the salient features of the guidelines are “retention of the affirmative right of a DPSU for prior approval to key JV decisions such as amendments to the Articles of Association of the JV company, declaration of dividend, sale of substantial assets, and formation of further JVs/subsidiaries”, the statement said.

Besides containing exit provisions, the guidelines stipulate regular reporting and monitoring of the functioning of the JV.

The guidelines follow the Defence Production Policy released last January to synergise and enhance the national competence in producing state-of-the-art defence products in a globally competitive manner. The policy allows for adoption of all viable approaches such as formation of consortia, joint ventures and public private partnerships within the government approved framework.

However, India Inc has been rather vary of forming JVs with the DPSUs given the 26 percent cap in FDI, which the industry says should be upped to 49 percent to enable them enhance their capabilities.

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