In likely policy reversal, mega ammunition orders ‘reserved’ for pvt sector may now allow PSUs


OFB out but BEL, ECIL likely to get in; controversy over banned foreign companies remains

A policy reversal that may hit the private defence industry, the government is likely to let in public sector units (PSUs) bid for a series of tenders to supply ammunition to the army amounting to billions of dollars over the next ten years.

The decision to allow at least two PSUs – BEL and ECIL – is likely to be announced after the companies made representations to the Defence ministry, asking for a level-playing field with the private industry.

As it has been reported, the Defence ministry had issued seven tenders for tanks, howitzers, armoured personnel carriers and anti-aircraft guns to meet critical needs that have been imported till now.

The big decision that the government had taken was to exclude the Defence Ministry-run Ordnance Factory Board (OFB) – which had been making all the ammunition in India until now – in order to give a boost to the private sector to set up new units.

However, ThePrint has now learnt that special representations by BEL and ECIL have found favour with the ministry, when the PSUs made the case that they should be allowed to compete freely with the private industry.

The change in stance has come as a surprise, because the PSUs had been excluded in the past meeting between the industry and the Defence ministry. In fact, sources said that in one particular pre-bid meeting in April, representatives from both BEL and ECIL were asked to leave when they landed uninvited.

As word about the new decision to include PSUs began to spread, negotiations between private companies and foreign collaborators have been hit.

One private sector executive told ThePrint that the foreign technology partner they were talking with for several months abruptly cut communication to approach one of the two PSUs.

“PSUs will have a big advantage over the industry – they already have defence grade infrastructure and have cash reserves to pay for earnest money and guarantees that the Defence ministry is asking for,” a senior executive, who did not wish to be named, said.

The seven tenders issue by the Defence ministry are being keenly watched by the industry – given the huge volumes and work over the next decade that they are expected to generate. The order for Armor-piercing APFSDS itself, for example, could exceed $ 1.26 billion while another order for fuses would be in the range of $ 1.5 billion.

The tenders have already courted controversy over an unprecedented clause that will allow foreign vendors who have been banned for corrupt practices in the past to tie up with the private sector as technology partners to manufacture ammunition. This will enable banned companies including IMI, Singapore Technologies and Rheinmetall to operate in the Indian market.