Indian firms to build military firepower soon

New Delhi: India has finalised its much-awaited defence policy to allow local private firms to build — through long-term foreign partnerships — high-tech equipment like submarines, fighter aircrafts and armoured vehicles. 

The strategic partnership model, whose “broad contours” were finalised by the Defence Acquisition Council (DAC) on Saturday, may get the Cabinet’s approval this month itself, in a boost to the Centre’s effort to cut reliance on imports in matters of national security. 

The defence ministry’s apex procurement panel, which usually meets once a month, has now met twice in a week, in a clear indication of the government’s keenness to push through the critical policy. 

Saturday’s two-hour deliberations, chaired by defence minister Arun Jaitley, reviewed ongoing acquisitions of military hardware and finalised “the broad contours of a policy aimed at engaging the Indian private sector in the manufacture of high-tech defence equipment in India”.

The model is a government-led effort for a transparent and competitive process to seek technology transfers and manufacturing know-how and set up domestic manufacturing infrastructure and supply chains. 

Foreign manufacturers such as Lockheed Martin, Boeing, BAE Systems and Saab are looking to India as one of the biggest sources of future growth. India is forecast to spend $250 billion on modernisation of its armed forces over the next decade.

A defence ministry power-point presentation on the subject says that while six Indian strategic partners will be shortlisted for each segment, preferably two or more global original equipment manufacturers (OEMs) will be identified for each segment. This will happen concurrently. “Even if one OEM is shortlisted, the process will be taken forward”, the document says.

As of now, the policy is expected to be implemented in three segments — fighter aircraft, submarines and armoured vehicles. However, the defence ministry may “add more segments or subdivide the existing ones as the model matures”. 

Finally, only one strategic partner will be selected per segment to maintain focus on core areas. While selecting the strategic partner, aspects like “willful default, debt restructuring and non-performing assets”, besides the technical and financial requisites, will be considered. 

In the final run, the selection will be based on a combination of price bids and segment-specific capabilities of the companies, says the document prepared after extensive stakeholder consultations with the Indian industry.

On the other hand, the degree of willingness of an OEM to conduct Transfer of Technology (ToT) to its Indian partner will be the main criterion in deciding whether the foreign company can qualify to partner an Indian company to manufacture military equipment.

In evaluating ToT, considerations will include “range, depth and scope of technology transfer offered in identified areas, extent of indigenous content proposed, extent of eco-system of Indian vendors/manufacturers proposed, measures to support strategic partnership in establishing systems for integration of platforms, plans to train skilled manpower, and extent of future research and development planned in India”, the presentation said.

The other critical criterion to be considered will be the willingness of the foreign company to help develop an ecosystem in India.