07 Nov 2016 12:43 IST

Defence blacklisting policy to be finalised today

Prospective application of the policy may impact projects worth ₹50,000 crore

Under pressure from private sector companies, the Defence Ministry is mulling the option of implementing the proposed blacklisting policy on retrospective basis to kick-start some of the stalled big ticket defence deals.

The Defence Acquisition Council (DAC), the topmost decision-making body under the chairmanship of Defence Minister Manohar Parrikar, is expected to finalise the blacklisting policy during its meeting on Monday.

The issue of its applicability is also going to be discussed at length during the meeting as the draft policy has come under sharp criticism from the industry, sources told BusinessLine.

The draft blacklisting policy, which was finalised last month, is proposed to be applicable prospectively.

Hence, this has become a major cause of concern for the industry because this means that all the firms previously barred will continue to remain blacklisted, thereby impacting defence projects worth ₹50,000 crore.

“The new policy will not help address the current challenges on account of blacklisting of a large number of foreign OEMs. A case-by-case review by the Defence Minister will lead to delays and discretion,” a CEO of a leading defence firm said, requesting anonymity.

Industry sources also fear that the idea of implementing the policy prospectively would result in reduced competition and a single-vendor situation.

“Blacklisting of the entire group, even though each company is a separate legal entity, has created a situation where majority of the new programmes will be impacted,” said another industry representative.

Single-vendor situation

Specific examples of a single-vendor situation include the procurement of Ultra Light Howitzers from BAE due to the blacklisting of Singapore Technologies.

The new submarines being acquired by the Indian Navy under the P-75 programme being developed by France’s DCNS will be without torpedoes for a long period of time, because of a non-compliant solution from Atlas and the blacklisting of WASS, a Finmeccanica company.

Once approved, the blacklisting policy, which will be rechristened as ‘Debarment Policy’, will be inducted into the Defence Procurement Procedure (DPP) of 2016 for the first time.

Blacklisting of defence companies relates to those firms that are found to resort to unscrupulous means to acquire the multi-billion dollar defence deals from the government.

At present, 15 entities, including six foreign firms, are blacklisted by the Ministry, while 23 others are under the scanner.

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