Strategic Partnership Model in Defence Manufacturing

The government’s ambitious Strategic Partnership (SP) model for promoting Indian private industry participation in defence manufacturing has come into effect.

The Cabinet took note of this proposal which deals with encouraging ‘Make in India’ in relation to defence equipment.

The SP model was part of the Defence Procurement Policy (DPP).

The guidelines of the policy were cleared by the Defence Acquisition Council (DAC) of the Defence Ministry and put up for noting by the Cabinet.

Under the “strategic partnership” model, the government will shortlist and then pick Indian companies to join forces with foreign firms to make fighter jets, helicopters, armoured vehicles and submarines.

Lockheed Martin, Boeing, BAE Systems, Airbus and Saab are among the key foreign companies looking at the India market. Many like Boeing and Airbus already source products worth $500 million annually from India.

The policy is aimed at engaging the Indian private sector in the manufacturing of high-tech defence equipment in India. The policy is expected to be implemented in a few selected segments to begin with—fighter aircraft, helicopters, submarines and armoured vehicles.

The policy is aimed at developing the defence industrial ecosystem in the country through the involvement of both the major Indian corporate as well as the MSME sector.

SP Model visualises designating a few private companies as Strategic Partners (SPs) that would not only assume the role of system integrators but also lay a strong defence industrial foundation by making long-term investment on production and R&D infrastructure, creating a wider vendor base, nurturing a pool of skilled workforce, and making a commitment to indigenisation and technology absorption.

The ultimate aim of the model is to enhance India’s self-reliance index in defence procurement which continues to remain at an abysmally low level despite a huge defence industrial complex much of which is managed by state-owned Defence Public Sector Undertakings (DPSUs) and the Ordnance Factory Board (OFB).

The SP model was proposed by the Dhirendra Singh Committee in July, 2015. It had said that 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.

The Indian defence industry is currently dominated by state-owned manufacturers, including HAL.

Indian firms Larsen and Toubro Ltd, Ashok Leyland Ltd, Mahindra and Mahindra Ltd, Reliance Infrastructure Ltd, Tata Group, Punj Lloyd, Adani Group and Bharat Forge Ltd, which have existing defence businesses, are likely to benefit the most from the decision.