N.C. Bipindra

BANGALORE, INDIA: India's engineering major Larsen and Toubro (L&T) and European consortium EADS' military arm Cassidian are kick-starting their new joint venture in defence electronics in the next two days with their proposal getting the nod from both the commerce ministry's Department of Industrial Policy and Promotion (DIPP) and the defence ministry.

Cassidian's Chief Executive Officer Stefan Zoller told IANS in an exclusive chat here Tuesday that their JV proposal with L&T got the government approval and it was already in force.

"We have got approval (for the JV). We have the joint venture in force. It is sign of our commitment to the country despite some difficult processes, I have to admit in the past, where we have been clearly negotiating for the right set up for the joint venture. We definitely respect whatever government rules to play and we have adapted accordingly, which means the joint venture is now up and running and now has to deliver," Zoller said.

The JV aims at manufacturing and related services in the field of electronic warfare, mobile bridges and avionics for military applications.

"There are limitations in shareholdings as far as manufacturing and production. Therefore we apply those rules. It is known that we share 26 percent (of the JV)," Zoller said.

The two firms had, in May 2009, announced their intention of launching the JV with a design, development and manufacturing base at Talegaon near Pune with L&T holding 51 percent and the remaining 49 percent to be shared by EADS at 24.5 percent and the JV itself holding the rest of the equity. L&T is expected to invest Rs..100 crore in the Talegaon facility.

This proposal was unacceptable to the defence ministry as it has set a Foreign Direct Investment (FDI) cap of 26 per cent. Following the objections, the two companies decided to tweak their proposal to suit the Indian defence sector FDI policy needs and resubmitted the proposal last year, which has now got the government nod.

L&T has been tapping the growing opportunities in the Indian defence sector and has been a major supplier of critical systems to India's defence forces for two decades, with its current revenues from the sector being about around Rs..400 crore.