New Delhi, September 12
In a development that will be watched keenly across the aviation and defence circles in the world, the Ministry of Defence has in-principle cleared 10 per cent disinvestment in the largest defence pubic sector undertaking (DPSU), the Hindustan Aeronautics Limited (HAL).

The MoD’s okay will now be vetted by the Ministry of Finance to arrive at the valuation of the company, its projected share price and also what kind of investment will be okayed — institutional or open to public. The public sector giant recorded sales of Rs 13,000 crore during the last fiscal. Sources in the MoD estimated that the valuation of the company, that owns vast tracts of lands in Bangalore and has plum joint-development deals in hand, would be in excess of Rs 65,000 crore.

The proposal will have to be cleared by the Cabinet Committee on Security (CCS) and also the Cabinet Committee of Economic Affairs (CCEA). The MoD proposes to disinvest 10 per cent across the next five years.

One of the reasons for the disinvestment is to mop up revenue. The Ministry of Finance has asked all ministries to suggest which of the PSUs could see some investment.

Sources said since HAL is key to Indian Air Force modernisation plans, the disinvestment will have to be carefully calibrated. It could be that the government permits only Indian institutions to pick up stake.

In the past, two DPSUs - Bharat Electronic Limited and Bharat Earth Movers Limited - have had some stake sold off. HAL is one of Asia's largest aerospace companies involved in manufacturing and assembling aircraft, navigation and related communication equipment as well as operating airports. One of the key projects is co-development of the fifth generation fighter aircraft (FGFA). India and Russia have signed a contract and HAL will be a Indian partner. HAL has just produced Light Combat Aircraft (LCA) and Tejas for IAF. It will get final operational clearance by the end of the year. A prototype of the Naval version is ready. HAL is already drawing up design for the medium combat aircraft and is also assembling Sukhoi-30-MKI in India.