Bangalore: Tata Motors, Larsen and Toubro, Tata Power Company, Mahendra and Mahendra, Godrej and Boyce, Bharat Forge, Infosys Technologies, Wipro Technologies and Tata Consultancy Services are among the 12 companies that have been cleared by a Ministry of Defence (MoD) appointed committee for Raksha Udyog Ratna (RUR) status.

Sources in the Ministry told The Hindu that the 12 companies, which were chosen from over 40 applicants, would, however, have to wait till the Defence Acquisition Council, headed by the Defence Minister, formally clears and makes public their names.

Once awarded the RUR status, these companies will be treated on a par with defence public sector enterprises such as Hindustan Aeronautics Limited, Bharat Electronics, Bharat Earth Movers Limited, Bharat Dynamics, Goa Shipyard, Mazagon Docks, and the ordinance factories and they could bid for defence contracts.

These companies will be allowed to access foreign technologies, enter into collaborations with overseas players and avail themselves up to 26 per cent foreign direct investment.

The RUR status will also enable them to get substantial government financial investment (up to 80 per cent) for design, development and manufacture of defence products, including fighter aircraft, tanks and warships.

`Offset clause'

The `offset clause' in defence contracts, wherein foreign firms bidding for defence projects valued at Rs. 300 crores or more have to mandatorily source at least 30 per cent of the financial worth of the contract from Indian companies, will provide the companies with ample business opportunities.

While companies such as Infosys and Wipro are keen on delving into engineering design work and electronic systems, those with strong manufacturing base like Larsen and Toubro will be involved in product ionisation, licence production and in the long term, even integration and final assembly of defence products.

A RUR company will enjoy the status for five years, with the possibility of a three-year renewal.

The qualification criteria is that a company should have a capital investment of not less than Rs. 100 crore, a turnover of Rs. 1000 crore, registered for at least 10 years with foreign holding (excluding foreign institutional investment) not exceeding 26 per cent.

While smaller companies, which are keen on getting involved in defence production, can become "satellites" of the RUR companies, public sector enterprises which are not in defence production, but keen to get into it could apply for RUR status.

A committee set up by the Department of Defence Production in September 2006 cleared the 12 companies. Chaired by Prabir Sengupta, Director, Indian Institute of Foreign Trade and a former Defence Production Secretary, the Committee has as its members Bakul H. Dholakia, Director, Indian Institute of Management, Ahmedabad, S.H. Khan, former CMD, Industrial Development Bank of India and N.R. Mohanty, former-chairman and managing director of Hindustan Aeronautics Limited.

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