Government holds extensive talks with Indian Industry, likely to soon announce SP policy for defence production


By Anupama Airy

 

Defence Minister Arun Jaitley on Thursday held detailed discussions with representatives of the Indian defence industry over the soon to be notified — the strategic partnership policy model for private sector participation in defence production including production of critical military platforms like fighter jets, helicopters, Main Battle tanks and submarines in India.

The meeting was attended by a large section of defence industry including industry associations representing large, medium and small defence companies. Apart from industry bodies (CII, FICCI and PHDCCI), the larger players who participated included representatives of defence arms of leading groups including Larsen and Toubro, Ashok Leyland, Mahindra and Mahindra, Reliance Infra, Tata Group, Punj Lloyd, Adani Group and Bharat Forge Ltd.

Top brass of the armed forces besides senior officials of the Defence Ministry including Defence Secretary were present at the meeting. RM Jaitley patiently heard everyone.

A presentation was made by the MoD to the industry on the policy framework proposed for the SP model. To see the details of the SP model proposed in the presentation, pl press the link below.

http://defenceaviationpost.com/wp-content/uploads/2017/05/SP%20PPT.pdf

Soon after the meeting the MoD gave out the following official statement :

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 proposed strategic partner model is intended to enhance competition, increase efficiencies, facilitate faster and more significant absorption of technology, create a tiered industrial ecosystem, ensure development of a wider skill base, trigger innovation and enable participation in global value chains as well as promote exports. This would gradually ensure greater self-reliance and dependability of supplies essential to meet national security objectives.

Sources said the Defence Acquisition Council (DAC), the ministry’s highest decision making body for capital acquisition, is expected to deliberate on the SP model on Monday.

INDUSTRY VOICES DURING THE MEETING

* Industry said the existing private players in defence manufacturing argued for “grandparent rights” so that established major companies are roped in, and committed orders for next 30 years.

* They said some participants favoured level playing field and expanding the industry base by allowing entry of new players while a few others were of the opinion that the government must be careful and should ensure that the model does not block flow of new technology to the sector.

* During the meeting some officials also raised concerns on “judicial intervention and federal audit” in case of award of successive orders to one ‘strategic partner’ without going for any competition.

* The proposed model envisages “sequential award” of contracts for four selected segments and some industry representatives felt such arrangements will lead to long time delays in implementation of mega projects.

INDUSTRY REPS (seeking anonymity) WHO ATTENDED THE MEETING TOLD THE FOLLOWING TO DEFENCEAVIATIONPOST

* Few good suggestions came up.  And then some debate happened. DEfence Secy summed up stating we will consider relevant recommendations and go for approval.

* It seems decision is made and everyone is playing safe and not willing to make any bold decisions. Selection is now three stage process. It will take longer and diluted.

* The meeting witnessed how the Industry stands vertically divided and suggestions made were solely to mould the policy in their favour or in favour of sectors they are good at.

* Good part was that technical Weightage has been increased and made equal to financial evaluation in phase 2. In phase three segment specific experience and competence will be valued with 20% weightage. 80% on price. So all contracts will be competitive. But added that Where is “strategic partnership” initiative?

* Meeting was a bit below expectation.

* The MoD presentation was read out and every one from Industry was asked to comment / make suggestions. It went all over the place with all the five chambers called members from micro to mega size companies where the policy not even being applicable to most.

 

* After every contract there will be repeat contract so no big investments would take place as none wuld be sure of repeat business. So we will again look at ToT under Make in India.

* How can there be the same financial threshold for all these four chosen segments of single-engine Fighter Aircraft, Helicopters, Submarines and Armoured Fighting Vehicles & Main Battle Tanks. You can’t have standardised criteria for all four segments

* They should have asked global OEMs and their chosen Indian Partners to submit MAKE IN INDIA proposals. One or two proposals could have been picked up under a ‘Strategic Partner’ slot for each need based on the relative strengths committed on local manufacturing, tech transfer, skill development, scale up time etc. This would have kept government firmly in the realm of creating good enabling public policy. Without actually directing Foreign OEMs to specific Indian Partners.

* Seems they (bureaucracy) want to get the policy approved and retire with nothing controversial (bold in other words) done

BACKGROUND TO SP MODEL:

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.

Last year, the then Defence Minister Manohar Parrikar had announced that the policy on SP model would be unveiled soon.

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