In a move that will give private-sector firms an opportunity to play a greater role in supplying arms to the military, the government on Wednesday shortlisted 13 firms, including Larsen and Toubro Ltd and an arm of the Tata group, for the Raksha Udyog Ratna (RUR), an accreditation that will make it easy for the companies to access foreign technology to make sophisticated military hardware.
The accreditation will also mean that the country’s armed forces will treat these firms on par with the government-run ordnance factories where bids for equipment supply are concerned.
The list of shortlisted companies was on Wednesday handed over to defence minister A.K. Antony by Probir Sengupta, chairman of the government-appointed selection committee.
Though the list was not made public, people close to the development said it included Tata’s new strategic division, engineering firm Larsen and Toubro, automobile firm Mahindra and Mahindra Ltd, and truck maker Ashok Leyland Ltd.
These firms were selected from among 41 companies that had bid to be granted the RUR accreditation.
This status will make it easier for foreign firms to invest up to 26% in the defence equipment production entities of the selected companies in keeping with the current laws on foreign investment.
It will also allow the selected firms to take advantage of the offset clause in big-ticket defence deals, where foreign buyers from whom the armed forces buy equipment are required to source components, assemblies, or parts worth 30% of the deal value from Indian companies.
Antony said the government’s move was guided by the desire to achieve long-term self-reliance in defence.
“Both the public and private sectors combined will not be able to absorb the 30 per cent offsets,” he said. India hopes to spend up to $10 billion in buying arms and other military equipment largely from foreign firms in the next three years.
“This should open the doors for greater private participation in building the country’s self-reliance in defence,” said Antony.
To be eligible for the accreditation, a company has to: be registered for 10 years with foreign holding not exceeding 26%, excluding foreign portfolio investment; have capital assets in India of not less than Rs100 crore; and have recorded a turnover of not less than Rs1,000 crore in each of the past three years.
Antony claimed that the move to grant these companies an RUR accreditation would not “cut into the future of public sector undertakings”.