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PSUs lose defence privilege
Defence minister A.K. Antony today withdrew the privilege of public sector undertakings to supply equipment to the armed forces.

This effectively means that the defence public sector undertakings (DPSUs) will have to compete with the private sector on a level playing field. But the government is apprehensive of the domestic private sector’s ability to produce equipment of adequate quantity and quality for the armed forces. More than 70 per cent of the weapons and platforms for the armed forces are imported.

The defence minister’s decision comes in the background of a row over defence public sector BEML’s privileged claim to supply Czech-origin Tatra trucks to the army over two decades, an issue flagged by the former army chief, General (retired) V.K. Singh.

Antony told a meeting of the Defence Acquisitions Council (DAC) that the DPSUs cannot be given contracts through nomination “unless the equipment is operationally very important”.

There are eight DPSUs. Although BEML claimed that it was making the trucks, more than 7,000 of which are in the service of the armed forces, inquiries have disclosed that the PSU was doing little more than assembling kits and selling them to the army at a marked-up price.

The defence ministry today also cleared the purchase of a networked command and control system for the Indian Air Force, short-range missiles for the army and onboard guns for the navy in decisions that mark the beginning of an arms purchase spree.

The DAC, chaired by Antony, was meeting for the third time in two months after V.K. Singh pointed to critical shortages in the arsenal in a letter to the Prime Minister in March. Friday’s DAC meeting was the first attended by the new army chief, General Bikram Singh.

Ministry sources said the council approved the purchase of three regiments of Quick Reaction Surface to Air Missiles (QR-SAMs), a self-defence system against aerial attacks for the army, for an unspecified price.

The command and control system for the air force, which will ride a countrywide optic fibre network connecting all assets, is estimated to cost Rs 7,000 crore.
The new purchases that have been approved include 14 Dornier transport and surveillance aircraft, to be made by the public sector Hindustan Aeronautics Limited for the air force. The council also cleared a Rs 1,500-crore purchase of 116 30mm naval surface guns, to be installed on navy and coast guard ships.