Tata Advanced Systems Ltd and Israel Aerospace Industries have lined up a $200 million joint venture in the defence arena.
Tata Advanced Systems Ltd and Israel Aerospace Industries have lined up a $200 million joint venture in the defence arena, perhaps the biggest private sector investment of its kind.
Israel Aerospace will hold 26% and Tatas 76% in the venture, named Nova Integrated Systems Ltd, which would manufacture unmanned aerial vehicles, missiles, radar systems, homeland security systems, and electronic warfare systems.
Tata Advanced Systems Ltd is a subsidiary of Tata Industries Ltd.
According to Israel Aerospace officials, their board approved a $50 million investment in Nova on January 27. The Tatas will pump in $150 million. Nova would be led by a retired Indian Air Force Air Marshal, officials said.
Nova would also take care of much of the offset-agreement requirements of Israel Aerospace, which has several massive defence contracts in its kitty despite its involvement in the Barak missile scandal. The Barak missile is jointly produced by Israel Aerospace and Rafael, another Israeli firm.
A Central Bureau of Investigation probe has unearthed prima facie evidence of kickbacks in the deal signed to buy the Barak missiles for the Indian Navy in 2000. Despite the scandal and a recent directive issued on defence minister A K Antony’s instructions to keep Israel Aerospace and Rafael out of tenders, the company continues to win huge contracts with the Cabinet itself making exceptions to it.
Israel Aerospace-Rafael combine has won a whopping $2 billion dollar joint development project —— Defence Research and Development Organisation is the Indian partner —— to make medium range surface to air missiles for the Indian Air Force.
This project, approved after the Mumbai attacks, had been in the cold storage since 2007.
The venture comes a few weeks after BAE Systems and Mahindra & Mahindra’s signed a 26:74 joint venture to develop mine-protected vehicles and other land-based military products.
Though there have been several collaborations announced between foreign military firms and Indian companies, most of them have been for the short term with no significant financial commitments. These two are probably the first significant steps by foreign firms to invest in defence in private sector in India.
The private sector is still hugely handicapped in making big forays into private sector because of several skewed rules that gives public sector undertakings and direct exports almost monopolistic hold over the booming defence sector.
A significant proposal to grant about a dozen private sector players such as the Tatas, Mahindras and L&T a status equivalent to defence PSUs is stuck with there being no political will to push it through
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