The Cabinet Committee on Securities (CCS) will grant its final approval on the inclusion of Strategic Partners (SPs), a model that the government plans to enter into with private firms in critical and high-end defence projects like building submarines, helicopters and fighter planes requiring long term commitments, both ways.
Significantly, the government is keen to institutionalise an independent regulator to deal with private sector players that would be chosen as strategic partners for major defence manufacturing programs. This independent regulator will be outside the purview of the Ministry of Defence and provide flexibility with unbiased view.
Defence Minister Manohar Parrikar met senior industry representatives on April 25 and held open and frank discussions over the “strategic partnership” issue, which he assured will be evolved “through consultative process and over the next one month.”
“We are expecting to finalise the model by May end and there could be few more meetings, as needed,” a senior defence ministry official said. “The final paper — after making constructive improvements — will be taken up for finance approval and then put up to the CCS,” he added.
Sources added that Parrikar assured the industry players that strategic partner model will be utilised only for very complex and technology intensive programs (more like single party buying process but after following due selection process).
The minister further asserted that wherever multiple sources are feasible and where certainty is higher, programs will go by the “Buy and Make (Indian)” route and the Strategic Partners model will be for just 3-4 select segments.
On queries by the industry, Parrikar said P75(I) submarines, helicopters and fighter aircrafts could be the segments that will be looked into for selection of SPs. Light Combat Aircraft MK2 itself could be pursued under the SP route. “With multiple helicopter and fighter programs there could be one or two strategic partners in either,” sources said.
The move to appoint an independent regulator is also in line with the recommendations of the government appointed panel — VK Aatre led task force on selection of strategic partners –that has suggested an independent regulator and a special auditing wing to deal with private sector players chosen as SPs.
“A regulator will be put in place as existing policies procedures and mind sets are rigid and do not allow flexibility needed for technology intensive programs needing pragmatic view in contracting and monitoring,” sources who attended the meeting said.
Industry seniors who attended the meeting included those representing industrial chambers CII, FICCI, Assocham, PHD Chambers of Commerce.
The meeting comes after reservations were expressed in certain quarters over the concept which calls for identifying one or two partners in key defence manufacturing fields.
MoD had set up in May 2015 a committee of experts for amendments to DPP2013 and formulation of policy framework for “Facilitating Make in India” in Defence Sector through Defence Procurement Procedure.
This committee, chaired by Dhirendra Singh, in its report in July recommended Strategic Partnership Model with Private Sector Industries for high-end defence production. After Acceptance of these recommendations, a task force was constituted by the defence ministry for selection of Strategic Partners under former DRDO chief V.K. Aatre as chairman.
The committee’s report had been submitted in Jan 2016, and it has categorised the sectors into two groups. The first group includes platforms like aircraft, helicopters, aero engines, submarines, warships, guns, including artillery guns, and armoured vehicles including tanks, and it has been suggested that only one partner should be finalised for these platform programs.
The second group includes strategic materials like metallic material and alloys, non-metallic material, including composites and polymers, and ammunition including smart ammunition, for which the Task Force said two partners can be identified.