Cabinet approves abolition of Separate Guidelines for establishing Joint Venture Companies by Defence PSUs

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved abolition of existing "Guidelines for establishing Joint Venture Companies by Defence Public Sector Undertakings (DPSUs)". These guidelines which were notified in February, 2012 will not be required for separate JV by the DPSUs. The Guidelines issued by the Department of Public Enterprises (DPE) and Ministry of Finance (MoF) from time to time, which are uniformly applicable to all Central Public Sector Enterprises (CPSEs) will be applicable for the DPSUs to set up JV companies now. This will meet the goal of indigenization / self-reliance in this sector.

The abolition of the existing JV Guidelines will provide a level playing field between DPSUs and the private sector. It will allow DPSUs to forge partnerships in an innovative manner enhancing self-reliance in defence and provide for enhanced accountability / autonomy of DPSUs in ensuring that the process of JV formation is effectively managed by them, so as to secure best outcomes in the interest of national security.

All nine DPSUs i.e. Mazagon Dock Limited, Goa Shipyard Limited, Garden Reach Shipbuilders & Engineers Limited, Hindustan Shipyard Limited, Bharat Electronics Limited, Hindustan Aeronautics Limited, Bharat Earth Movers Limited, Bharat Dynamics Limited and Mishra Dhatu Nigam Limited will be benefited through this decision.

The decision comes in the backdrop of the issues which emerged in the operationalisation of JV guidelines of DPSUs. The Department of Defence Production came to the conclusion that with the increasing participation of the private industry in defence sector and the transformation taking place in the defence acquisition eco system thereon, the requirement of having separate JV guidelines for DPSUs is no longer considered necessary. In the emerging scenario with primacy being accorded to indigenous manufacturing / Make in India, it is felt that having multiple set of guidelines may lead to ambiguity and incongruity in the environment.

Background:

Defence Production Policy promulgated in January 2011 with the objective of achieving substantive self-reliance in defence production including design and development capability had recommended that all viable approaches including JVs to be undertaken to achieve the desired self-reliance in defence production. Consequent to this, a need was felt to supplement the DPE guidelines with formulation of JV protocols / guidelines tailored for DPSUs which would address the specific requirements of the defence sector and also ensure that the interests of DPSUs were safeguarded. Accordingly the existing Guidelines for establishing Joint Venture Companies by DPSUs was approved by the Cabinet during the meeting held on 9th February, 2012 and the same was notified on 17th February, 2012. Now, the requirement for having separate JV Guidelines for DPSUs has been reviewed in the context of the increasing participation of the private industry in defence sector and the transformation taking place in the defence acquisition eco system.

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