Key defence meet to finalise strategic partnership today

New Delhi: Chaired by defence minister Arun Jaitley, a crucial meeting to finalise the draft on the long-awaited strategic partnership (SP) model will be held from 11am on Thursday at an undisclosed location in the national capital.

The meeting will be attended by key ministry officials and top defence industry captains. It will discuss the final draft of the SP model before it is taken to the defence ministry’s apex procurement body the Defence Acquisition Council which is likely to be held on May 15.

Under the SP model, select private Indian defence firms in collaboration with major foreign manufacturers will be allowed to exclusively make various military platforms for a specified period of time. The central idea behind the model is to harness strengths of private industry to create capacity and infrastructure for these strategic segments over and above that existing in the public sector units like ordnance factories and DRDO.

Another objective of such a policy is to fire up the competitive zeal in the defence public sector units.

The government had set up five sub-groups — aircraft and helicopters, armoured fighting vehicles, submarines, ammunition, and macro process management of issues.

The SP model has been encountering resistance from a section of the MoD bureaucracy. With the initial idea to rope in one private strategic partner for each platform, a few bureaucrats opposing the proposal feel that the one partner norm may usher in a monopoly situation besides allowing for arbitrary price fixation.

It is also felt that the policy should encourage maximum competition with no artificial restrictions and that once companies eligible to be strategic partners are shortlisted, market forces should be allowed to determine the best combination of the Indian SP and foreign manufacturers.

A chapter on Strategic Partnerships was to form part of the Defence Procurement Procedure 2016 (DPP-2016) but had to be postponed as the then defence minister Manohar Parrikar sought suggestions from the corporate sector. Already the DPP 2016 has been made public except for the chapter on strategic partnerships.

The industry on its part has been seeking safeguards from creation of monopoly situation in defence production besides clarity on criteria to select SPs, FDI rules versus SP norms, and joint ventures with foreign OEMs under the SP model.

In many cases, the industry is seeking at least two partners for logistical reasons as the requirements are big as well as with huge market potential. For example, in case of the AFV, the sub-group has itself suggested two separate strategic partners—one for main battle tanks and another for infantry combat vehicles.

After being finalized by the defence ministry, the policy will have to be vetted by the finance ministry as the new policy would involve financial obligations before being okayed by the Union Cabinet.