What comes as a shot in the arm for private sector defence players, India’s Ministry of Defence on May 20 finalised a “Strategic Partnership” policy (SP Policy) for select private parties to build military platforms such as submarines, private jets and armoured vehicles in India in collaboration with global armament majors.
Breaking new ground, the ‘strategic partnership model’ looks to create a vibrant defence manufacturing ecosystem in the country with involvement of both the major Indian corporates as well as the MSME or the Micro, Small & Medium Enterprises sector.
While the finer details of the new model is yet to be finalised, the defence acquisitions council (DAC), chaired by India’s defence minister Arun Jaitley, also gave a nod to the army to proceed with its long-term plan to bring in three squadrons (39 choppers) of attack helicopters for its three ‘strike’ corps, among other modernisation proposals, according to media reports.
“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 building of self-reliance in the vital sector,” the ministry said in a statement.
India currently imports 65 percent of its military requirements, and during times of conflict, there is a possibility of the country being strategically choked by foreign powers. With this in view, India desperately needs to upgrade its defence infrastructure and manufacturing equipment at home that would save foreign exchange, cut procurement delays and generate jobs.
Also, a number of major projects are awaiting strategic partnership. While the Navy needs 147 multi-role helicopters with anti-submarine warfare, the Army wants FRCVs (Future Ready Commercial Vehicles) and FICVs (Future Infantry Combat Vehicles). The IAF, on one hand, wants second single-engine fighter production line after the original Tejas fighter while the Project-75-India for six stealth diesel electrical submarines is yet to find a defence/private shipyard and foreign collaborator.
The policy, which is initially expected to be implemented for four major segments of fighter jets, helicopters, submarines and armoured vehicles – tanks and infantry combat vehicles, for private sectors players, is likely to be expanded to other segments at a later stage.
Under this model, a pool of six defence firms from India is likely to be formed permitting them to bid for big-ticket military projects. The firms are L&T, Tata, Mahindra Defence, Reliance Defence, Bharat Forge and Adani Group.
Reports suggest that the SP roadmap, which will take almost a year to unfold, will select only one company as the SP at a time in each of the four segments by way of a transparent and competitive process engaged for long-term partnership.
The defence ministry will select the companies on the basis of adequate financial strength (Rs 4,000 crore in annual turnover over the last three fiscals with capital assets of Rs 2,000 crore etc), demonstrable manufacturing and technical expertise, existing infrastructure, along with the ability to take in technologies from their foreign partners. A company’s record of “willful default, debt restructuring and non-performing assets” will also be considered by the defence ministry.
Meanwhile, the foreign companies or original equipment manufacturers (OEMs) will be selected, in a separate but parallel process, principally on the basis of the “range, depth and scope” of the transfer of technology (ToT) they are willing to offer. Indigenous content, eco-system development, supplier base and future R&D, among other things will be other criteria for selection.
That apart, given the stiff resistance by the public sector lobby against the SP policy, defence PSUs, shipyards and Ordnance Factory Board (OFB) will also be eligible to compete with private sector companies for selection as SPs in the submarine and armoured vehicle segments.
The SP policy will now go to the Cabinet Committee on Security for final approval once the finer details are worked out.
