L&T seeks protection for local defence sector

Engineering major Larsen & Toubro (L&T) is seeking protection for the domestic defence industry.

It wants the government to force foreign players into tie-ups with local partners when they bid for defence projects.

In a recent presentation to the government, L&T sought the introduction of this pre-condition in tender notices issued for defence projects.

The company also wants the foreign outfit that bags a deal to transfer technology to the local partner at the end of the contract period.

The L&T presentation has sought a clear-cut functional policy framework for private players in the defence sector.

Says P M Mehta, senior vice-president - operations, and a member of the L&T board, "The domestic defence industry is at a nascent stage. The idea is to prevent local players from being edged out by foreign competitors."

At present, the arms and ammunition needs of the Indian Army are met through imports and the 39 Ordnance Factories. Private players are yet to make a breakthrough in this market, Mehta said.

L&T, which has bagged the industrial licence to produce almost the entire range of defence equipment, is expecting its defence equipment division to clock a turnover of over Rs 900 crore by fiscal 2007 from around Rs 250 crore in this fiscal.

The Tata group, the Godrej group and Mahindra & Mahindra are among the other big India Inc names that do defence-related business.

"Under the current guidelines, ammunition suppliers are required to provide prototypes on a no-cost, no-commitment basis. While we have the ability to produce high-quality stuff as per the required standards, developing prototypes is a time-consuming process, apart from being expensive. In such cases, we are easily beaten by foreign companies. This should not be the case," Mehta told Business Standard. The company is also seeking clarity on the process of order placement by the government to private players.

L&T said the Department of Defence Production has to emerge as the representative body of all Indian companies in the defence equipment business. Currently it represents only the public sector companies.

Mehta said the indigenisation process in the defence sector is not being established. "While we have the informal consent of the top officials in the defence ministry and the three services, concrete steps would pave the path for a speedy growth," he added.