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With no govt deals L&T's defence unit may face loss - The Economic Times
MUMBAI: Larsen & Toubro (L&T), which has invested Rs 2,500 crore to manufacture ships for the defence sector in Kattupalli in Tamil Nadu, faces the prospect of loss on its investments in the absence of orders, says a senior executive. The government is placing the order for manufacturing warships to public sector firms and importing submarines from foreign countries.
"If the government does not buy products of our shipyard, we will have to look at options for capacity utilisation of our new facility and also think on deploying manpower at other operations," said senior executive vice-president (heavy engineering) MV Kotwal.
The Kattupalli facility is scheduled to start commercial operations by December this year. The facility, which will have a total investment of Rs 3,000 crore, has 3,500 employees.
The Indian defence sector opened up for private participation in 2001 with the FDI limit capped at 26%, prompting companies like L&T, Tata, Ashok Leyland , Mahindra and Mahindra and Bharat Forge to enter the sector. However, L&T and Tata are among the few, which have developed capabilities to manufacture strategic equipment and acquired standard qualifications.
L&T's heavy engineering division had received licences for manufacturing submarines, warships and some of the strategic equipment in 2002.
It had also supported government agencies in manufacturing India's first indigenous nuclear powered submarine, INS Arihant, in June last year. But it is yet to get any government order for submarine. "It came as a rude shock," said Mr Kotwal. "Our facility at Hazira was evaluated and cleared for this purpose way back in 2001," he added.
Industry bodies - Federation of Indian Chambers of Commerce and Industry (Ficci) and Confederation of Indian Industry (CII) - have proposed restructuring the defence procurement policy to encourage greater private sector participation.
"Similar to other sectors, defence sector, too, needs more private participation. It will help the country to bring down expenses," said Vivek Pandit, director for energy and defence at FICCI. According to a latest report released by CII and KPMG, the defence ministry does not provide long-term equipment procurement plans to even big private companies, thereby denying the private players the lead-time to develop the equipment needed in the future.
The Indian defence sector has planned to spend Rs 4,50,000 crore on military equipment in the next 10 years. India imports 70% of its defence requirements, while the remaining is produced by Defence Public Sector Undertakings (DPSU) or its collaboration entities.
MUMBAI: Larsen & Toubro (L&T), which has invested Rs 2,500 crore to manufacture ships for the defence sector in Kattupalli in Tamil Nadu, faces the prospect of loss on its investments in the absence of orders, says a senior executive. The government is placing the order for manufacturing warships to public sector firms and importing submarines from foreign countries.
"If the government does not buy products of our shipyard, we will have to look at options for capacity utilisation of our new facility and also think on deploying manpower at other operations," said senior executive vice-president (heavy engineering) MV Kotwal.
The Kattupalli facility is scheduled to start commercial operations by December this year. The facility, which will have a total investment of Rs 3,000 crore, has 3,500 employees.
The Indian defence sector opened up for private participation in 2001 with the FDI limit capped at 26%, prompting companies like L&T, Tata, Ashok Leyland , Mahindra and Mahindra and Bharat Forge to enter the sector. However, L&T and Tata are among the few, which have developed capabilities to manufacture strategic equipment and acquired standard qualifications.
L&T's heavy engineering division had received licences for manufacturing submarines, warships and some of the strategic equipment in 2002.
It had also supported government agencies in manufacturing India's first indigenous nuclear powered submarine, INS Arihant, in June last year. But it is yet to get any government order for submarine. "It came as a rude shock," said Mr Kotwal. "Our facility at Hazira was evaluated and cleared for this purpose way back in 2001," he added.
Industry bodies - Federation of Indian Chambers of Commerce and Industry (Ficci) and Confederation of Indian Industry (CII) - have proposed restructuring the defence procurement policy to encourage greater private sector participation.
"Similar to other sectors, defence sector, too, needs more private participation. It will help the country to bring down expenses," said Vivek Pandit, director for energy and defence at FICCI. According to a latest report released by CII and KPMG, the defence ministry does not provide long-term equipment procurement plans to even big private companies, thereby denying the private players the lead-time to develop the equipment needed in the future.
The Indian defence sector has planned to spend Rs 4,50,000 crore on military equipment in the next 10 years. India imports 70% of its defence requirements, while the remaining is produced by Defence Public Sector Undertakings (DPSU) or its collaboration entities.
