Private sector can bid for role in Rs5,000 crore defence project

Private sector can bid for role in Rs5,000 crore defence project
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First Published: Tue, Jul 14 2009. 10 40 PM IST
Updated: Tue, Jul 14 2009. 10 40 PM IST
Bangalore: India has decided to let local private firms bid for a $1 billion (Rs4,880 crore) project to modernize the army’s tactical communications system, according to three people familiar with the development.
If the proposal is carried through, it would be the biggest military project till date that would be thrown open to domestic private companies.
Tata Advanced Systems Ltd, defence subsidiary of the Tata group, and Roltas Thales Ltd, a joint venture of Roltas India Ltd and France’s Thales group, have expressed interest in bidding for the project.
India’s defence acquisition council, the key sanctioning authority for large military projects, in June cleared a proposal allowing local private firms to compete with state-owned ones for the communications system, a defence ministry official said.
All three people with knowledge of the proposal spoke on condition of anonymity, citing the sensitive nature of the development.
The system, conceived in the 1990s, is aimed at equipping the defence forces for network-centric warfare in which ground troops are connected with the air force and navy through a satellite-linked, secure and integrated voice, data and video communications system.
The decision to involve local private companies in a project of this size came after the ministry in September introduced a new procurement policy that put the thrust on building domestic technology to reduce dependence on foreign firms for large military projects. It would take at least three years for the project to be awarded to a bidder, the official said.
The army will seek expressions of interest from private firms after an integrated project management team lays down specifications for the system, another official in the ministry said.
The suppliers would have to then submit a pilot project, followed by technical and commercial bids, the second official said.
“The defence ministry has recognized that the domestic industry has come of age,” said Ratan Shrivastava, director, aerospace and defence, at consulting firm Frost and Sullivan.
According to an earlier policy, the army was authorized to buy the tactical system from a foreign firm and then have local companies build subsequent versions. This was followed with a second suggestion that leant in favour of state-owned Bharat Electronics Ltd, the only company equipped for such a project. Roltas Thales and Bharat Electronics said they are yet to receive any notice from the ministry about a policy change.
Ashok Kumar Gakhar, project director, Roltas Thales, said it would bid, but source the technology from Thales and customize it for the army.
Tata Advanced Systems did not respond to emails and phone calls. The Tata group had in February 2008 unveiled plans to team up with the defence and security division of European Aeronautic Defence and Space Co. NV to bid for the communications project.
Of the total capital outlay of Rs54,824 crore for defence in the 2009 Budget, the army has been sanctioned Rs11,121 crore for its ongoing modernization programme such as tactical communications and unmanned aerial vehicle projects, according to Frost and Sullivan. The government increased defence allocation by 34% to Rs1.41 trillion over the previous fiscal year.
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First Published: Tue, Jul 14 2009. 10 40 PM IST