Upset over IAF's decision to bar PSUs like HAL from participating in a mega tender, Union Heavy Industries Minister Praful Patel has questioned why state-run units were being kept out and demanded they be given an equal opportunity.
Patel shot off letters to Prime Minister Manmohan Singh and Defence Minister AK Antony, saying many PSUs who meet all prescribed criterion for participating in the tender for supply of 56 transport aircraft to the Indian Air Force are being denied the opportunity to participate only because they are PSUs. The deal is estimated to be worth Rs 12,000 crore.
"This being a government/public procurement, an equal opportunity and level-playing field is required to be provided to all capable entities irrespective of being 'Public' or 'Private' in nature. This will also encourage healthy competition," said Patel, whose NCP is a key UPA ally, in his communication.
Antony on Wednesday asked his ministry officials to examine the issues raised by Patel.
"The Defence Ministry is in receipt of a letter dated 07 October 2013 from the Minister of Heavy Industries and Public Enterprises addressed to the Defence Minister on the matter of procuring 56 aircraft as replacement of the existing AVRO fleet.
"Antony has asked the Defence Ministry officials to examine the issues raised by Patel," the Defence Ministry said in a statement.
Antony as a head of the Defence Acquisition Council (DAC) had approved the IAF proposal for procuring these aircraft sidelining the PSUs.
Patel, who also holds the Public Enterprises portfolio, further said: "There are many PSUs who meet all the prescribed criterion for participating in this tender, but are being denied the opportunity to participate in this tender only because they are PSUs".
The IAF has to acquire 56 transport aircraft to replace its aging Avro fleet. In the tender, issued on May 9 this year, the defence ministry had by-passed PSUs like Hindustan Aeronautics Ltd (HAL) and said new aircraft will be produced by the Indian private sector firms.
Patel said in the letter that the extensive facilities, infrastructure and capabilities of these PSUs have been created over a period of time through government investments. These PSUs have also gained invaluable experience as well as expertise in this area, he added.
Eight foreign vendors including American Lockheed Martin, Swedish Saab, Russian Rosoboronexport, Spanish Airbus Military, Italian Alenia and Brazilian Embraer have bid for the contract and they will have to find an Indian partner to produce 40 aircraft within India.
Indian majors such as Tata, Mahindra Defence Systems, Reliance Industries and L & T were expected to partner the bidding foreign partners for the programme.
"While government's policy of encouraging private sector participation in Defence sector is appreciated, any preference/discrimination among potential Indian entities-Public or Private is likely to be construed as an act against spirit of public procurement particularly when capable PSUs are available to participate in this tender whereas there is no private company presently capable to undertake this work," he said.
Of the 56 aircraft, the first 16 would be produced at the production facility of the foreign vendor while the remaining would be produced at the facilities of its Indian partner, sources said.
The first 16 aircraft to be produced in India will have to have 30 %indigenous component while the remaining 24 planes will have 60 %locally-procured and produced items, officials said.
They said the 56-aircraft project would help in developing a domestic aerospace industry and capability to undertake such projects.