Strategic Partnership

The implementation of the policy on strategic partnership will be a shot in the arm of the India aerospace and defence industry

Issue: 5 / 2017By Air Marshal B.K. Pandey (Retd)Illustration(s): By Anoop Kamath

The concept of Strategic Partnership in the domain of defence manufacturing was a part of the recommendations in the report by the Dhirendra Singh Committee that was submitted in July 2015. The Committee set up to review the defence procurement procedure, recommended that for the ‘Make in India’ initiative to become effective in the defence manufacturing sector, the government should adopt a strategic partnership model, whereby a private firm is chosen for the development of a weapon system or platform required by the Indian armed forces.

After nearly two years since the strategic partnership model in defence manufacturing was mooted, the policy is about to be finalised by the Ministry of Defence (MoD) and is to be released very soon. However, some delay in its release may be expected as a final round of discussion with key stakeholders on the policy is yet to take place following which the Defence Acquisition Council (DAC) will take up the issue for further deliberations. Only after the policy is cleared by the DAC, it will be put up for consideration by the Cabinet Committee on Security.

The strategic partnership model in defence manufacturing envisages collaboration between a foreign original equipment manufacturer (OEM) and a suitable company in India to produce an aircraft, submarine, tank or a weapon system required by the Indian armed forces. Technology and know-how would have to be mandatorily transferred to the Indian company to progressively build up a defence manufacturing eco-system in the country. This is one of the primary objectives of Prime Minister Narendra Modi’s ‘Make in India’ programme. One of the major challenges will be to ensure that right partners are selected both from abroad and from within the country. Guidelines for this have been laid out in the second part of the report. One stipulation in the report was that a company that has been selected as a strategic partner for any one product, will not be eligible for strategic partnership for any other product. This provision was incorporated in the guidelines to prevent the emergence of monopolies. However, it is understood that there has been some change in this provision. To ensure wider competition in each sector, there will now be more than one Indian manufacturer permitted to join the fray.

As for the selection of the foreign OEM, it will be the responsibility of the Government of India to identify the appropriate company from amongst the contenders. Any OEM that will be prepared to design and develop a platform or weapon system with an Indian partner and subsequently undertake its manufacture in India, will be given a preference over others.

Post meeting with stakeholders, a MoD release stated, and “The Ministry is working towards institutionalising a transparent, objective and functional mechanism to encourage broader participation of the private sector in defence manufacturing under the Make in India framework.” The Defence Acquisition Council (DAC) is slated to meet shortly to decide on the draft policy, but whether a final call will be taken during this meeting is anybody’s guess. But the fact remains that keeping the decision in limbo adversely is affecting the defence of the country. In a country like ours, satisfying everyone is an impossible task especially where big money implies fierce competition.

Since the SP policy aims to boost manufacturing of critical defence armaments by private sector, government must take a final decision without further delay. The fact that 15 months after release of DPP 2016 we have not yet arrived at the SP Policy is sad commentary. Concurrently, red-tape must be reduced as India still way behind in terms of ease of business and this should include a more liberalized FDI policy. At this point in time, there is urgent need to finalise and release the policy on strategic partnership at the earliest. Hopefully, this policy will provide the much needed impetus to the ‘Make in India’ programme. The Indian Air Force needs to induct fighter aircraft in large numbers and quickly.

The implementation of the policy on strategic partnership will be a shot in the arm of the India aerospace and defence industry as also will definitely speed up the modernisation of the Indian Armed Forces.