Larsen and Toubro and Pipavav Defence on Saturday signed two separate deals with the country's biggest naval shipyard, Mazagon Dock, to produce equipment for the defence sector.
The deal with Larsen and Toubro comes nearly a year after L&T complained to the defence ministry, alleging foul play in the selection of Pipavav Defence as the sole joint venture partner, forcing the government to put the joint venture on hold.
According to the new joint venture signed, Mazagon will partner L&T to manufacture submarines for the navy while the venture with Pipavav will make frigates, destroyers and aircraft carriers.
"Mazagon will now look to execute much of the existing orders through these joint ventures," a senior official at Mazagon said on condition of anonymity. L&T Shipbuilding was not available for a comment.
India, which currently imports more than 75% of its naval defence requirement, had earlier made elaborate plans to step up the production of equipment and the defence ministry then allowed partnership with private companies for the manufacturing process.
Mazagon dock was the first among the public sector companies to invite a joint venture partner to undertake its order book which runs into more than 1 crore. When Mazagon decided to partner with Pipavav Defence, a host of private shipyards such as ABG, Bharati and L&T questioned the selection process and raised the issue with the defence ministry. The ministry then put the joint venture on hold until a new policy was established and, in February, the government issued new policy guidelines for defence sector PSUs.
"L&T has finally managed to have its say. They need defence orders to tide over their current situation. Pipavav and L&T Shipbuilding have been struggling in recent times to receive orders and the joint venture should help them with orders and more cash flow," said an analyst with a leading domestic brokerage firm.
The deal with Larsen and Toubro comes nearly a year after L&T complained to the defence ministry, alleging foul play in the selection of Pipavav Defence as the sole joint venture partner, forcing the government to put the joint venture on hold.
According to the new joint venture signed, Mazagon will partner L&T to manufacture submarines for the navy while the venture with Pipavav will make frigates, destroyers and aircraft carriers.
"Mazagon will now look to execute much of the existing orders through these joint ventures," a senior official at Mazagon said on condition of anonymity. L&T Shipbuilding was not available for a comment.
India, which currently imports more than 75% of its naval defence requirement, had earlier made elaborate plans to step up the production of equipment and the defence ministry then allowed partnership with private companies for the manufacturing process.
Mazagon dock was the first among the public sector companies to invite a joint venture partner to undertake its order book which runs into more than 1 crore. When Mazagon decided to partner with Pipavav Defence, a host of private shipyards such as ABG, Bharati and L&T questioned the selection process and raised the issue with the defence ministry. The ministry then put the joint venture on hold until a new policy was established and, in February, the government issued new policy guidelines for defence sector PSUs.
"L&T has finally managed to have its say. They need defence orders to tide over their current situation. Pipavav and L&T Shipbuilding have been struggling in recent times to receive orders and the joint venture should help them with orders and more cash flow," said an analyst with a leading domestic brokerage firm.
Both Pipavav and L&T Shipbuilding recently received interests from foreign companies for a strategic financial stakes. While Mitsubishi showed interest in L&T, French major DCNS was eyeing a less than 10% stake in Pipavav for more than 800 crore.
Mazagon's decision to award two joint venture projects comes at a time when the public sector shipyards have been struggling to complete projects on time. In 2011, the Comptroller and Auditor General (CAG) had rapped the public sector shipyards for their inadequate infrastructure and rising costs.
(Source-: Economictimes)