In the context of the report headlined “Mazagon in the dock for hush-hush joint venture pact,” published on July 22, 2012, Parvez N. Panthaky, Public Relations Officer, Mazagon Dock Limited, Mumbai, has sent in the following statement:

In order to enhance self-reliance in defence shipbuilding and produce state-of-the-art naval vessels within time-lines and price-lines that are globally competitive, the Government of India has issued guidelines for the formation of joint ventures (JVs). Pursuant to this policy, Mazagon Dock Limited (MDL) has signed shareholder agreements to set up JVs with private shipyards Pipavav Defence & Offshore Engineering Co. Ltd., Mumbai and Larsen & Toubro, to construct surface warships and conventional submarines respectively. The joint ventures will leverage the strengths of the respective JV partners in the public and private sectors to work out a collaborative strategy to take the nation towards self-sufficiency in warship construction. MDL may further explore the feasibility of diversifying its product profile by entering into partnerships with other eligible leading shipbuilders.

S. Anandan, Special Correspondent, who authored the report, writes:

MDL’s pact, and the company’s latest statement, leave several questions unanswered.

The guidelines of the Department of Defence Production for the establishment of joint venture (JV) companies by Defence Public Sector Units require that they assess all possible options, such as subcontracting and outsourcing, and the formation of consortia and project-specific special purpose vehicles, before taking up a case for JV. The MDL-Pipavav JV sidestepped the norm: a proper viability study was not conducted. MDL issued a limited tender for consultancy to carry out capacity assessment, the feasibility of subcontracting and outsourcing of anticipated projects by MDL, and the capability of the partner company besides the viability of the JV. While three consultants showed interest, none was engaged to do such an assessment. The MDL guidelines for consultancy appeared tailor-made to suit the prospective JV partners. In violation of norms, the drafting was done in consultation with Pipavav and L&T.

While outsourcing and subcontracting do not make it obligatory on the part of MDL — which has a huge edge over all others in warship-building in India — to part with niche technology, logistics and expertise to a relatively new player, the JV does so. The JV de facto offers on a platter to Pipavav, which has not built a warship till date, the procedures, design capability, technology and so on. This when MDL had shown a historical reluctance to share the niche technology with other defence and PSU shipyards.

Both JVs were executed, obviating competition. Other players would have competed had they been given an opportunity.

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