Defence ministry puts Pipavav-Mazagaon Dock JV on hold

Defence ministry has decided to put on hold a joint venture between the state-run Mazagon Dock and private sector shipbuilder Pipavav Defence and Offshore Ltd, saying it would wait till a policy on JVs is put in place by the government.

Earlier this month, Pipavav Defence said it had formed an equal JV with Mazagon Dock to build submarines and warships, making the private firm eligible to execute part of Mazagon’s orderbook of $21.2 billion.

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Defence Minister AK Antony said on Monday the ministry will study the complaints received from some private shipyards regarding the JV. He didn’t elaborate on the nature of the complaints.

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Antony, addressing a meeting of the consultative committee attached to his ministry, a release of which was put on the government’s website, also said that JVs must compete for contracts and should not get them on nomination basis.

The controversy over Mazagon Dock’s choice of Pipavav Shipyard as its naval joint venture partner snowballed into a big controversy, after ABG Shipyard and Larsen and Toubro (L&T), another bidder Bharati Shipyard, raised questions over the selection process.

Seeking clarity on the issue, Bharati Shipyard in its letter, dated September 16, to MDL said that it has made a presentation on the proposal to form a JV with MDL on 23 August and was asked by the defence PSU two days later to provide further details and terms of reference for the formation of JV.

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Last week, L&T and ABG Shipyard had questioned the selection process, while pointing out the lack of transparency over the selection of Pipavav Shipyard as Mazagaon Dock Ltd’s JV partner.

In their separate letters to Mazagon Dock, both the companies had said that they were not given chance to respond to the proposal of becoming the JV partner despite making presentations and submitting their expression of interest (EoI).

Both the companies had also requested the defence PSU to reconsider its decision and forwarded a copy of their letters to Defence Secretary, Defence Production Secretary and Chief of Naval Staff.

Besides this, the two companies pointed out that neither any guideline nor any specific time line was mentioned for submitting the JV proposal.

The controversy arose following an announcement of Pipavav Shipyard on 12 September, that it has been selected by the MDL as its equal joint venture partner for construction of warships and submarines among others.

The move would be the first example of public-private partnership in the defence sector.

Agencies