Article Posted on : - Feb 09, 2012

NEW DELHI (PTI): Government of India 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 Thursday 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."