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Mumbai, April 01, 2005, Rajesh Unnikrishnan
(Financial Express)
In a move that could signal a tectonic shift in India’s
policy towards private participation in defence production,
the ministry of defence has asked Tatas and L&T
to submit a request for proposal (RFP) for commercial
production of Pinaka, India’s first indigenous
Multi-Barrel Rocket Launchers (MBRL). Much India’s
defence production is at the 39 ordnance factories and
8 defence sector PSUs.
Though the first order to L&T and Tatas may be
as small as Rs 9 crore, it promises to open the floodgates
for the private sector. Out of India’s total defence
budget of over Rs 80,000 crore, about Rs 15,000 crore
will go to importing weapons and related equipment.
The private sector sees a big business opportunity here.
Tatas alone are looking at annual revenues of Rs 2,000
crore from defence by 2008.
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NEW HORIZONS
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• India opened defence
production
to private sector in 2001
• Tatas, L&T associated with Pinaka from
beginning
• Private sector sees big business opportunity
in defence
Tata Power (strategic electronic division) CEO Rahul
Chaudhry said: “we have received a letter from
the defence ministry asking us to submit a RFP for
the commercial production of Pinaka.” A senior
L&T offical also confirmed the ministry’s
letter. |
In 2001, India opened defence production to its private
sector, allowing only up to 26% FDI. Recently, the Centre
formed a panel chaired by Vijay Kelkar to suggest ways
to integrate the private sector with India’s defence
industry.
Tatas and L&T are involved in the Pinaka project
from the time it was conceived. The strategic electronics
division of Tata Power has already developed a prototype
Pinaka launcher. This underwent extensive user field
trials during the Kargil war. Besides, Tata Advanced
Materials Ltd has been developing launcher tubes and
containers for rockets and missiles. L&T, meanwhile,
has developed the 2-axis DC servo drive for the Pinaka.
In the event of the deal going through, both Tata Power
and L&T will have to make around 40 Pinaka MRBL
each for the two regiments.
Sources pointed out that Indian industrialists have
remained circumspect about their involvement with the
defence sector. This is due to the Economic Order Quantity
factor which does not provide for large orders making
it commercially untenable. Defence making equipment
typically entails heavy investments. “Besides,
corporates have been wary of dealing with the rule-bound
defence ministry and developments of this nature are
positive” they added.”
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Tatas, L&T ready for new era in defence production 