Sources said that steps under discussion include ways to ensure that the interest on heavy bank guarantees that shipyards give to the defence ministry against contracts can be channelled back into the system

New Delhi: The navy is looking at alternate funding models to provide more liquidity to shipyards in the face of a resource crunch brought on by increased spending and a diminishing share in the annual budget that has impacted large acquisitions.

While it is hopeful that the economy will bounce back soon, the navy has suggested funding models to the finance ministry that can help shipyards engaged in major projects in the short term to tide over liquidity crisis.

“We are prioritising our acquisitions and looking at areas like ordnance, networking and unmanned solutions and we have found that we can get certain equipment at a lower price through indigenous route… we have also approached the ministry of finance with some funding models, specially for shipyards, which can provide them better liquidity,” navy chief Admiral Karambir Singh said in response to a question by ET.

Sources said that the air force is also interested in alternate funding models that can guarantee funds for acquisition of large systems being manufactured indigenously. As reported, an Indian Defence Finance Corporation has been proposed to the defence ministry, on lines of a similar body under the railway ministry.

With salary and pension bills rising, the armed forces have been hard pressed to find resources for modernisation and acquisitions. The navy, for example, will barely be able to meet its committed liabilities in the current financial year and may not be able to acquire new planned platforms.

Sources said that steps under discussion include ways to ensure that the interest on heavy bank guarantees that shipyards give to the defence ministry against contracts can be channelled back into the system.

Major acquisitions coming up for the navy include a project to make six conventional submarines in India under the P 75I program. The navy chief said that the matter would be taken up at the next meeting of the defence acquisition council following which tenders will be issued to start the acquisition.

State-owned Mazagaon Dockyards Limited and private sector giant L&T are bidding for the contract, which will require them to partner with a foreign technology provider. The navy is also pressing ahead on its demand for a third aircraft carrier to be built indigenously after the INS Vikrant that is undergoing final fitting at Kochi.

The navy has been at the forefront of Make in India, with all 24 ships and submarines commissioned into service over the last six years being built indigenously. Also, of the 43 ships and submarines currently under construction, 41 are being built at Indian shipyards.