BANGALORE: The Government of India might shortly enter into financial collaborations with the private sector in defence equipment manufacture.

Its investment will primarily be for the design and development of defence products that will be jointly developed, and could amount to a maximum of 25 per cent of the developmental costs.

The Government's financial stake will ensure product quality and assured orders from the armed forces. But the investments will be restricted to manufacturing companies that are listed as `Raksha Udyog Ratnas' (RURs), or "Champions."

According to N.R. Mohanty, former chairman and managing director of Hindustan Aeronautics Limited and the Independent Technical Expert on the Defence Ministry's committee that is selecting companies that are to be given the RUR status, the list of such companies could be out as early as April.

Mr. Mohanty said: "Applications have been invited from the companies that have a Rs. 1,000-crore turnover and a capital outlay of Rs. 100 crore. A few companies have made presentations before the committee; some have also been visited (by Engineers India Limited who are providing the requisite technical support) for verification."

Once on the RUR list, a company will be able to compete on a par with public sector enterprises (PSEs) or other RURs for lucrative contracts such as undertaking licence production with transfer of technology from overseas sources and involve in prestigious development projects.

The RUR list could have giants such as Larson and Turbo, Tatas, Reliance, Mahindra & Mahindra and others that have the technical and financial competence to build fighter aircraft, tanks or warships.

Those PSEs, which are not in defence production, but keen on getting into it, could also apply for the RUR status.

Mr. Mohanty disagreed that defence PSEs would be at a disadvantage vis-à-vis their private sector competitors. "This will enhance competition and efficiency in the defence PSEs."

According to Mr. Mohanty, the decision to go in for RURs would not only enlarge the country's technical base, but also create employment and wealth to small and medium enterprises.

"Becoming an RUR naturally means more global business opportunities," he said.

Once recognised as an RUR, a company would enjoy the status for five years, with the possibility of a three-year renewal.

The genesis for RURs stems from the Government's Defence Procurement Policy 2006, under which in a bid to strengthen self-reliance in defence preparedness, it had constituted the Vijay Kelkar Committee "to examine and recommend changes in the acquisition process in order to synergise the efforts of various stakeholders, improve the prospects of indigenous production and to utilise the resources available both in the public and private sector".

The Kelkar Committee had in turn recommended that tier-I industries may be identified and systematically encouraged to contribute in defence production, eventually becoming system integrators of large weapon systems and producers of platforms that are required by India's defence forces.

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