Government sets joint venture guidelines for defence PSUs

The union cabinet today approved guidelines for establishing joint venture companies by defence public sector undertakings (DPSUs), a step aimed at sourcing of advanced technology and improving defence production capacity.

The guidelines, prepared by the defence ministry for effective public-private partnership in the defence sector, contain provisions for important matters that are critical from a national security perspective, an official release said today.

The guidelines aim at enhancing fairness and transparency in the selection of the joint venture partner while ensuring a well defined nature and scope of the JV - an issue that has come up in the wake of defence PSU Mazagon Dock's proposal for setting to a joint venture with a private sector shipyard.

This would be of interest to companies, including Larsen and Toubro, Mahindra and Mahindra, who had objected to the Mazagon Shipyard's deal at that time.

As per the guidelines approved today, the defence public sector undertaking will retain the affirmative right for prior approval to key joint venture decisions, such as amendments to the articles of association of the JV company, declaration of dividend, sale of substantial assets, and formation of further JVs and subsidiaries.

The guidelines provide for exit provisions for the DPSU in case of a disagreement as also regular monitoring and reporting of the functioning of the JV company.