Raksha Utpadan Ratnas now a step away

In a low-key meeting in the Ministry of Defence (MoD) today, the Prabir Sengupta Committee presented its recommendations before Defence Minister AK Antony on which private companies would be granted the title of Raksha Utpadan Ratnas (RURs), that is, Champions of Industry.

Set up in May 2006, the committee examined the applications of 41 Indian companies for the RUR status. Around 15 of them, including Mahindra & Mahindra, Tata and L&T, were called between December 2006 and February 2007 to make presentations before the committee.

Though the MoD has kept a lid on how many have been recommended for the status; sources say the figure is 5-7. The report will now be considered by the Defence Acquisition Council (DAC).

The status will continue for five years, after which the selection committee and the DAC will have the discretion to give three-year extensions. Defence Minister AK Antony says the DAC approval will be accorded at the earliest. "It will be done by the end of this year," he said.

The firms selected as RURs shall be treated on a par, for the purpose of defence production, with defence public sector undertakings (DPSUs) and ordnance factories (OFs).

The benefits of the RUR status are:

The eligibility to design, develop and produce major weapons platforms and defence systems.

To manufacture weapons and equipment developed by the Defence R&D Organisation (DRDO). At present, all such productions are awarded to DPSUs and OFs.

The companies will be eligible to receive technology from foreign defence corporations, and to undertake licensed production of foreign-origin systems.

The RURs will be able to undertake defence R&D, funded by the MoD. The ministry has already announced that it will fund 80 per cent of the R&D cost by RURs into specified defence systems.

The RURs will be eligible for duty-free import of equipment for defence R&D, and preparing prototypes of weapons and equipment.

Mahindra & Mahindra's fully-owned defence subsidiary, Mahindra Defence Systems, set up in 2000, is one of the companies that may be nominated as an RUR.

Brigadier Khutab Hai, chief executive, Mahindra Defence Systems, says, "This is a very important day for us provided the MoD actually equates RURs with DPSUs. We should be allowed to develop high-tech weapons platforms by benefiting from R&D funding, sharing knowledge with the DRDO, and working with the services headquarters to have a clear idea of their requirements well ahead of time."

The backlash from the public sector has already begun. Trade unions from OFs and DPSUs have challenged the entry of the private sector into defence production on the grounds that this will take away their jobs. After accepting the committee's report on RURs, the defence minister allayed the fears of the trade unions.

"We want to make it clear that there is no intention to weaken the DPSUs. Even the combined public and private sector does not have the capacity to meet all the defence business that will be generated as a result of the 30 per cent offset on defence imports. So we are bringing in reputed, credible private sector firms to increase our ability. But we will make sure that we do not weaken the DPSUs," he said.