Boom time for Tata Motors

The government has granted a  direct industrial licence to Tata Motors to manufacture a host of defence-related items, including light armoured multi-role vehicles, special attack surveillance vehicles, high mobility vehicles and bulletproof cars, utility-vehicles and troop carriers.

The licence was an assurance that the government would either procure these vehicles, or allow Tata Motors to export them to friendly countries, sources told Business Standard.

When contacted, Tata Motors executives declined to comment. This is likely to be the biggest-ever licence granted to a private company in the defence sector since the government allowed private sector participation in defence production, including foreign direct investment in early 2002.

The government largely procures defence equipment from overseas countries, especially Russia and Israel, and various state-owned units.

At present, only a few private companies like Ashok Leyland and Mahindra & Mahindra supply equipment directly to the Army.

The Tata group had earlier announced plans to procure defence-related business worth Rs 2,000 crore (Rs 20 billion) by 2008.

The group is already the single largest private sector player in the defence sector with revenues of over Rs 500 crore (Rs 5 billion).

Various Tata group companies have also geared up to generate business from the estimated Rs 10,000 crore (Rs 100 billion) defence contract market.

These are Tata Power, Nelco, Tata Consultancy Services, Tata BP Solar, Tata Infotech, Tata Advanced Materials and Voltas.

The companies provide various solutions, including transportation solutions, air-conditioning, machine and manufacturing, security and surveillance, electronic sub-systems, personal armour and software services.

As per government rules, only an Indian company or a partnership firm with a resident Indian as its chief executive would be allowed to undertake defence production. It allows 100 per cent privately owned companies with up to 26 per cent foreign equity participation to take up production of arms and ammunition.