In a major decision to give a fillip to the Indian private sector in Defence manufacturing, the Defence Acquisition Council (DAC), chaired by Defence Minister Arun Jaitley, on Saturday finalised the “broad contours” of a policy generally known as ‘Strategic Partnership (SP)’.
The new policy will allow the private sector to manufacture hi-tech weapon systems, including submarines, fighter aircraft and armoured vehicles in India in collaboration with foreign partners.
The Defence Ministry will identify the most suitable Indian manufacturer and allow it to forge a joint venture with foreign original equipment manufacturers (OEM) for building complex weapon systems.
Aimed at fast tracking the ‘Make in India’ policy in the Defence sector, the SP concept cleared by the DAC will have to be passed by the Cabinet Committee on Security (CCS), chaired by Prime Minister Narendra Modi. Once given the go-ahead the proposed policy will become part of the Defence Procurement Procedure (DPP) which provides the guidelines for all the vendors about the acquisition process.
Giving details of the SP cleared by the DAC, Defence Ministry officials termed it as “breaking new ground” and said the policy is aimed at developing the Defence industrial eco-system in the country through the involvement of both the major Indian corporates as well as the Micro, Small and Medium Enterprises (MSME) sector. The policy, which was developed through extensive stakeholder consultations with Indian industry, envisages the establishment of long-term strategic partnerships with qualified Indian industry majors through a transparent and competitive process wherein the Indian industry partners would tie up with global OEMs to seek technology transfers and manufacturing know-how to set up domestic manufacturing infrastructure and supply chains.
The policy will give a boost to the ‘Make in India’ policy in the Defence sector and set Indian industry on the path to acquiring cutting-edge capabilities which will contribute to the building of self-reliance in the vital sector of national security requirements, they said.
The policy is expected to be implemented in a few selected segments to begin with, namely, fighter aircraft, submarines and armoured vehicles. In future, additional segments may be added. Appropriate institutional mechanisms will be in place to implement the policy, officials said.
last week, Jaitley held a meeting on the SP model with representatives of Defence arms of leading groups including larsen and Toubro, Ashok leyland, Mahindra and Mahindra, Reliance Infra, Tata Group, Punj lloyd, Adani Group and Bharat Forge ltd.
Some industry representatives in that meeting favoured a level playing field and expanding the industry base by allowing entry of new players. It was learnt that some officials had also raised concern about possible “judicial intervention and federal audit” in case of award of successive orders to one ‘strategic partner’.
The SP model was proposed by the Dhirendra Singh Committee in July, 2015. It said for the ‘Make in India’ initiative to become wider in the Defence sector, the Government should adopt a strategic partnership model, whereby a private firm is chosen for the development of a specific identified platform. last year, then Defence Minister Manohar Parrikar had announced that the policy on SP model would be unveiled soon.
Welcoming the DAC decision, President of Federation of Indian Chamber of Commerce and Industry(FICCI) Pankaj R Patel, said,”involvement of the Indian Private Sector as Strategic Partners in Hi-tech Defence Manufacturing and recognising them as system of system integrators will germinate the requisite growth shoots for ‘Make in India’ in Defence and Aerospace Manufacturing”.
Patel pointed out that this will be a win-win situation for the Government, Strategic Partners from Indian Private Sector, the OEM and the technology driven Defence MSMES who will get in to tierised supply chains of the srategic partners. While the main vendor will get assured orders over a specified period so that it could further commit business to its tierised vendors thus contributing to the development of a vibrant Defence Industrial Base. The Defence Ministry will benefit by the cost competitiveness and the frugal engineering capabilities of Indian industry, cut imports and help the foreign OEMs to leverage these relationships to serve new markets worldwide.