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Corporate Jul 15, 2013

Defence ministry clears MDL-Pipavav JV sans preferential treatment

New Delhi: The defence ministry today cleared the Pipavav Shipyard-Mazagon Dockyards (MDL) joint venture but it won't be nominated for any of the warship projects with the government shipyard and will have to bid through the normal process to get such contracts.

After allegations of favouritism and non-compliance in formation of joint ventures between public sector enterprises and private shipyards, the defence ministry had put on hold the MDL-Pipavav JV in April but cleared it recently after making changes in its guidelines on such tie-ups.

New shipping joint venture. Reuters

New shipping joint venture. Reuters

The JV has been cleared with a rider that it would not be nominated or given any preferential treatment in awarding warship building projects of the navy and the Coast Guard, said defence ministry sources in New Delhi.

Under the nomination process, the defence ministry awards warship building projects to defence shipyards under it without holding any tender or bidding process.

The 50:50 JV between MDL and Pipavav was the first tie-up between public and private sector shipbuilders in the defence sector and was aimed at easing the workload of MDL, the largest defence shipyard in the country.

However, formation of the MDL-Pipavav JV had been mired in controversy since its inception and was put on hold for second time in April by the defence ministry amid allegations of non-compliance and favouritism.

MDL, which accounts for more than 85 per cent of the defence vessels built in the country, is estimated to have an order book of over Rs 100,000 crore.

The government has also made it clear that even for getting the contracts from MDL, the JV firm will have to bid.


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