Contrary to its stance of providing a level-playing field for government firms, public sector units and private players in defence manufacturing under ‘Make in India’, the defence ministry has nominated the government-owned Ordnance Factories Board (OFB) as one of the three companies to undertake design and development of Fighting Infantry Combat Vehicle (FICV). Two other Indian private companies will be selected by competition, according to a letter sent by the defence ministry to 10 bidders on January 14.
“We have been promised a level-playing field by the government. This FICV development project will cost between Rs 1,000-3,000 crore, and if government has already nominated the OFB, it sends a wrong signal to all the other private players,” top official of a private Indian defence company told The Indian Express.
In this project being executed under Defence Procurement Procedure-2008 (DPP-2008), two Indian firms were to be selected to design and develop separate FICVs within 18 months to replace the army’s fleet of obsolete 2,610 Russian BMP-2 carriers. After the latest amendment, three companies —and OFB has already been nominated — will develop the prototype, and each of them will be reimbursed 80 per cent of their costs by the government.
The Indian Express spoke to three firms bidding for the FICV project, who said that by executing the project under DPP-2008, the indigenous content will only be 30 per cent. If the project was to be executed under DPP-2013 — or under DPP-2016 which was announced by defence minister this week but is to be still notified — the indigenous content will be a minimum of 50 percent.
Private Indian defence firms allege that the assessment criteria for selection of two private companies are flawed and rule out most of the nine companies from contention. The financial criterion for a ‘Make in India’ project under DPP-2008 (Appendix C, Paragraph 22) stipulates that the company should have been registered for a minimum of 10 years, with a foreign holding of less than 26 per cent and an annual turnover of not less than Rs 1,000 crore in the past three years. These rule out seven of the nine private companies, except Tatas and L&T, invited for the bid.
On October 1, defence ministry had issued a note to the contenders stating that domestic operation alone would count whilst evaluating a company’s commercial eligibility and strength — a key determinant for who will win the FICV project. This has raised questions about profits from Tata’s UK-based subsidiary Jaguar Land Rover (JLR), which underpin Tata Motors’ consolidated turnover of Rs 2,63,695 crore and a net profit of Rs 13,986 crore last year.
If JLR’s profits are not counted towards Tata’s financial assessment, only L&T will qualify as a private company for designing and developing the FICV prototype. Industry sources say that this anomaly could be legally challenged by the losing bidders which will lead to stalling of the FICV project.
Meanwhile, clearing the air over its participation in the bidding for the FICV project, Tata Motors said that it continues to be a strong bidder.
“We meet the requisite criteria for bidding for the FICV project,” the firm said in a statement.
Private companies also say that the weightage of assessment criteria, where only 8.31 per cent weightage is given to technical assessment catering to the FICV product structure, runs contrary to the primacy promised in Paragraph 24 of the DPP.