Private defence manufacturing: Defence Ministry unveils strategic partnership policy

One of the highlights is the need for the chosen SP to enter into relevant tie-ups with foreign original equipment manufacturers (OEM).

By: Express News Service | New Delhi | Published:June 1, 2017 1:40 am
defence ministry, defence manufacturing The SP model will initially be applicable in four segments: Fighter Aircraft, Helicopters, Submarines, and Armoured fighting vehicles (AFV)/Main Battle Tanks (MBT).

To bolster defence manufacturing in India through indigenous private defence firms, the defence ministry has unveiled the Strategic Partnership (SP) policy as part of the Defence Procurement Procedure (DPP). The 17-page document, delineating the contours of the SP policy was put up on the defence ministry website on Wednesday.

The new policy aims to “reduce current dependence on imports and gradually ensure greater self-reliance and dependability of supplies essential to meet national security objectives”. It was approved by the Defence Acquisition Committee (DAC), chaired by defence minister, Arun Jaitley in May and noted by the Cabinet Committee on Security last week.

The original recommendation for SP model included selection of a private Indian defence manufacturer for one particular segment (submarines, helicopters etc) and guaranteeing them all orders of that product for the next 20 years. That guarantee has been dispended with, and subsequent acquisitions of any platform will be open to all, though adequate weightage will be given to “capacity creation and capability development including infrastructure, tiered ecosystem of vendors, skilled human resources, futuristic R&D etc”.

The SP model will initially be applicable in four segments: Fighter Aircraft, Helicopters, Submarines, and Armoured fighting vehicles (AFV)/Main Battle Tanks (MBT). Only one SP will generally be selected per segment, as per the criterion laid down. Stringent conditions for a minimum of 51 per cent Indian ownership of the SP have been laid out in the policy.

As per the policy, “the SP is expected to play the role of a System Integrator by building an extensive eco-system comprising development partners, specialised vendors and suppliers, in particular, those from the MSME sector”. The selection criteria for SP, therefore, will be based on the inherent capacity and ability of the vendor to emerge as a systems integrator and to set up a vendor network for sourcing.

One of the highlights is the need for the chosen SP to enter into relevant tie-ups with foreign original equipment manufacturers (OEM). Accordingly, the ministry will shortlist, through an open process based on Staff Qualitative Requirements (SQRs), Technology Transfer needs and indigenisation roadmap, a list of potential OEMs in each of these four segments. The process of shortlisting of OEMs will be done by the ministry simultaneously with the process of identifying potential SPs.

The OEM will be jointly responsible along with the SP for certification and quality assurance of the platforms supplied to the armed forces. To ensure ‘Make in India’, the policy states that only a minimum number of platforms, not exceeding 10-15 per cent of the number of units being procured, can be manufactured in the OEM’s premises. Moreover, the SP shall commit to a plan to indigenise, in terms of value of production, manufacturing of the platform over a set period for each platform as defined in each proposal. The unveiling of the SP model is likely to push the production of some of the longstanding procurement proposals of the defence services.

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