MUMBAI (Reuters) ? India's 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 after reports of lack of transparency in the deal.
The decision to put the deal on ice comes at a time when the government is trying to combat alleged corruption charges on a host of issue including the allocation of telecom spectrum and contracts for commonwealth games.
The move to put the first private-public defence joint venture on hold also comes when Prime Minister Manmohan Singh's government has been accused of policy paralysis by global investors and corporate India.
The defence ministry has decided to wait till a policy on JVs is put in place by the government, it said in a release posted on the government's website, justifying its move.
"We are treading on a new path and we would like to ensure that transparency is maintained at all levels," Defence Minister A.K.Antony said.
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.
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.
Antony also said that JVs must compete for contracts and should not get them on nomination basis.
"The issue needs to be fully examined and settled before any forward movement takes place on this front," Antony said.
The Mint newspaper had reported earlier in September that engineering conglomerate Larsen & Toubro had questioned Mazagon Dock's decision to select Pipavav as a joint-venture partner to build warships, saying the selection process was not transparent.
Nikhil Gandhi, the chairman of Pipavav Defence, could not be immediately reached for a comment. He had said during a press conference to announce the Mazagon Dock joint venture that the selection process was transparent.
Larsen & Toubro couldn't be immediately reached.
India's private firms including ABG Shipyard, Bharati Shipyard and Larsen & Toubro have been eyeing the lucrative defence sector business. Pipavav's Gandhi had said that his group will be investing over $1 billion to build warships.
Shares in Pipavav, valued at $1.09 billion surged nearly 12 percent on Sept 12 when the deal was first announced. The shares have however fallen almost 11 percent since the Sept 12 closing price.
On Monday, the stock closed flat at 81.25 rupees, ahead of the announcement by the defence ministry.
(Reporting by Aniruddha Basu; Editing by Subhadip Sircar)
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