December 21, 2011

Indian Freezes All Defense Shipyard Joint Ventures

India has put on hold formation of all joint ventures in defense shipyards until suitable guidelines are formulated by the government.
The decision was made after a joint venture between state-run shipbuilder Mazagon Dock Ltd. (MDL) and Pipavav Defense and Offshore Engineering Co. was objected to by other commercial shipyards (Aerospace DAILY, Sept. 27).
“Formation of joint ventures has been put on hold by the ministry until formulation of suitable guidelines regarding the manner in which joint venture partners can be selected for such ventures,” junior Defense Minister M.M. Pallam Raju said in parliament Dec. 19.
The Indian defense ministry is now forming a new policy for public-private business partnerships to establish greater transparency.
“Guidelines will also cover the terms and conditions of such joint ventures so that interests of PSUs [public sector undertakings] can be fully safeguarded and their ability to provide service to armed forces is not constrained in any manner,” Raju said.
Raju was responding to a question concerning whether the ministry had halted the joint venture between MDL and Pipavav “due to the objections raised by private shipyard companies.”
The ministry made the decision “in order to ensure complete transparency in the selection of partners for joint ventures,” he added.
The joint venture, announced Sept. 12, was intended to create an independent company named Mazagon Dock Pipavav Ltd. that would work on Mazagon’s 1 trillion rupee ($22 billion) backlog and bid for future defense orders. Pipavav had announced that the two JV partners would each hold a 50% stake in the venture.
Pipavav was the first company in the private sector to receive orders for frontline warships, which are priced from $100 million to $6 billion each. The company has outstanding orders of $1.5 billion, of which 42% are defense contracts. Pipavav Defense owns India’s largest dry dock and has a license from the government to build warships.
However, Raju said all defense public sector unit shipyards were being modernized to enhance their capacity and capability to deliver ships faster.
“Private shipyards participation is also being encouraged to meet the requirement of [the] navy and coast guard,” he added.


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