Government nod for joint ventures by defence PSUs

Last Updated: Friday, February 10, 2012 - 00:56

New Delhi: Government on Thursday approved Defence
Ministry guidelines for its public sector units (PSUs) to
establish joint ventures with private firms, a step that will
increase opportunities to obtain advanced technologies from
foreign sources.

"The Union Cabinet today approved the guidelines for
establishing Joint Venture Companies by Defence Public Sector
Undertakings (DPSUs). The guidelines contain provisions for
important matters that are critical from a national security
perspective," an official release said here.

"The Ministry will issue the guidelines to harness the
emerging dynamism of the private sector in India and
increasing opportunities to obtain advanced technologies from
foreign sources through adoption of appropriate partnership
approaches by DPSUs," it added.

Such JVs were allowed in the Defence Production Policy
released last year but they were recently put on hold by the
Ministry after the Mazagon Dockyards Limited (MDL) tied up
with a private shipyard, which was opposed by its other rival
companies.

Officials said the guidelines will help in "enhancing
fairness and transparency in the selection of the JV partner"
by the DPSUs while ensuring a "well-defined nature and scope"
of the tie up.

As per the guidelines, DPSUs will retain the "affirmative
rights" for taking key decisions in the JV company.

"Retention of the affirmative right of 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
subsidiaries," the release said.

The guidelines provide a "streamlined, fair and
transparent framework for entering into JVs by DPSUs, with the
ultimate objective of better risk-management and shorter time
frames for delivery to meet the increasing demands of our
armed forces."

They said the new framework will also help in "enhancing
self-reliance in the defence sector as a whole. As per the
guidelines approved by the Cabinet, the DPSUs will have the
"exit" provision in the Joint Venture companies.

"The formation of JVs will henceforth be undertaken by
Board-managed DPSUs within the framework of the JV guidelines
and there will be regular reporting and monitoring of the
functioning of these companies," the release said.

Officials said, "It is expected that the guidelines will
foster better and deeper partnerships between the DPSUs and
private partners, in order that substantive self-reliance is
adequately achieved in the synergised environment."

PTI



First Published: Friday, February 10, 2012 - 00:56

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