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'Govt barred HAL from aircraft deal as it's overloaded with work

Oct 09, 2013 11:37 AM IST Politics Politics

New Delhi: While Heavy Industries Minister Praful Patel has questioned the Ministry of Defence for barring PSUs from IAF aircraft deal, sources say that the government took the decision deliberately. Sources have told CNN-IBN that the government took the decision to keep Hindustan Aeronautics Limited (HAL) out of it, since HAL is overloaded with projects.

Sources also say that the government wanted to encourage private local players in this sector. So under the deal, the government is expected to buy 16 aircraft off the shelf from a foreign firm. That firm then has to co-produce 40 aircraft with a local Indian private player.

The industry, though, is worried that a foreign firm would not want to transfer technology for only 40 aircraft and the deal may get held up. Also technically, HAL does not have a new aircraft ready for display for tendering. Aircraft produced by it in the past have been afflicted with serious time and cost overruns.

Praful Patel has hit out at the Defence Ministry for barring Indian PSUs from taking part in a $3 billion Indian Air Force aircraft deal. He said he cannot accept the logic given by the MoD for barring PSUs. "I can't accept MoD's logic that it's a huge contract. We are allowed to grow, aren't we," Patel questioned.

He also said that he was not taking on the government but only fighting for his own ministry. "Please don't see politics in it. As the Heavy Industries Minister, I have the right to fight for PSUs," Patel said.

Praful Patel has written to Defence Minister AK Antony asking why PSUs like HAL have been barred. In identical letters to Prime Minister Manmohan Singh and AK Antony, Patel has said that PSUs should be given an equal opportunity and level playing field and that this would encourage healthy competition.

"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 in his letter.

Antony, as the head of the Defence Acquisition Council (DAC), had approved the IAF proposal for procuring these aircraft sidelining the PSUs.

Patel, in his letter, 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 Indian Air Force 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 bypassed PSUs as Hindustan Aeronautics Ltd (HAL) and said new aircraft will be produced by the Indian private sector firms.

The tender was issued to eight foreign vendors including American Lockheed Martin, Swedish Saab, Russian Rosoboronexport, Spanish Airbus Military, Italian Alenia and Brazilian Embraer 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.

This comes just ahead of the Prime Minister's visit to Russia and China where this deal is expected to be signed.

(With additional information from PTI)