All Eyes Set On Jaitley’s Policy on Strategic Partnerships For Private Sector Participation In Defence Production

Team DefenceAviationPost

* The Ministry of Defence has readied the Strategic Partnership Policy blueprint that will pave the way for participation of Indian private sector in production of critical defence Programs, be it fighter jets, land systems or submarines

* A detailed presentation highlighting the SP policy will be made before the industry leaders tomorrow (May 11) and followed by this there will few more rounds of internal meetings to incorporate any major views coming from the industry in the Thursday meeting

* The policy does not need to go to the Cabinet for approval and will be cleared and approved at the next meeting of the Defence Acquisition Council (DAC) scheduled sometime next week


* The Strategic Partnership concept to be kickstarted in 4 of the 10 segments identified by the Aatre Task Force in 2016.

* These includes Single-engine Fighter Aircraft; Helicopters; Submarines
and Armoured Fighting Vehicles & Main Battle Tanks

* The Ministry of Defence may add more segments as the Strategic Partnership Model matures.

* Interestingly this segmentation closes the door on twin-engine fighter aircraft, restricting the IAF’s choice to American Lockheed Martin’s F-16 and Swedish Saab’s Gripen for meeting the shortfall of multi-role fighters.

* No change in the previous policy draft i.e. Only one Strategic Partner per segment to be selected.

* The selection of the SP will be by way of competition without any nomination.

* It will be a two-stage selection process.

* A pool of 6 Indian companies will compete for coming as the Strategic Partner in the selected four segments.

* Similarly a pool of 8 foreign OEMs will be created out of which two will be selected per segment.

* Shortlisting of foreign Original Equipment Manufacturers (OEMs) to be done based on technical offers and depth of transfer of technology.

* The strategic partnership model plan of the MoD under former defence minister Manohar Parrikar had envisaged that all major defence programs for the Indian armed forces — be it for the fighter aircrafts, land systems or the submarines, will involve participation of an Indian company along with a foreign vendor or Original Equipment Manufacturer (OEM)–ready to transfer technology and meets the laid out parameters of the government of manufacturing defence systems in India.

* The OEMs will be required to submit a technical bid in response to an Expression of Interest (EoI) within two months.

* RFPs will then be issued to the pool of 6 selected Indian companies, which will negotiate a tie-up with the shortlisted OEMs to jointly submit their techno-commercial bids.

* For award of contract, 80 per cent of the weightage will be given to price competitiveness and 20 per cent to technical capability.

* High benchmarks have been set for Indian companies for consideration as Strategic Partner.

* As part of the minimum qualification criteria, the turnover of the company must be over Rs 4,000 crore for each of the last 3 financial years.

* The consolidated capital assets need to be over Rs 2,000 crore, and the applicant company must have a minimum credit rating equivalent to CRISIL/ICRA ‘A’.

* From the technical standpoint, the applicant must have a demonstrated capability of integration of ‘system of systems’.

* Once selected for one segment, a company will not be considered for any of the remaining three.

* Tata, L&T, Adani, Mahindra & Mahindra, Reliance and Bharat Forge are the six companies in the fray for these 4 segments.

* Finalisation of Strategic Partnership (SP) Policy model for defence production is one initiative that Defence Minister Arun Jaitley will want to add to the list of achievements in defence sector currently being readied by his ministry on the completion of three year’s of Modi government in power.

* The strategic partnership policy will not just encourage production of critical defence equipments and weapon systems in the country, thereby reducing our huge dependence on defence imports but will also turn India into a major manufacturing base for defence production.

* Defence giants from across the world have already evinced keen interest to partner India in its Make in India drive for the defence sector and dozens of initial tie-ups with leading Indian defence companies have already been announced.

* Therefor all eyes are set on the meeting that Raksha Mantri Arun Jaitley will chair on Thursday (May 11) when he meets the Indian industry and share highlights of this important policy document, which has been readied by the defence ministry.

* As the Modi led BJP government completes three years in office on May 26, the highest government office — Prime Minister’s Office (PMO) has been keen on an early decision on this policy considering that Defence manufacturing will be the biggest contributor in the PM, Narendra Modi’s `Make in India’ initiative.

* As reported first by on May 7 that this will the last leg of consultations that the MoD will be holding with the Indian industry on the Strategic Partnership Policy and the final blueprint will then be put up for a final clearance before the DAC. This does not require any further clearance from the Cabinet.

* Sources said that soon after Thursday’s meeting, a meeting of DAC has been planned to seal the policy.

* The May 11 meeting with the Indian industry will be held at the Indian Air Force Aakash Mess in New Delhi at 1100 hours.

* The session will be initiated by the defence secretary and Raksha Mantri Arun Jaitley will join the consultation for interaction with industry representatives.

* Jaitley at a recent industry meet had already stated that India is in advanced stages of developing a policy to encourage domestic defence manufacturing to reduce dependence of the Indian armed forces imports, currently at a staggering $10 billion per annum.

* “India is the world’s largest arms importer, spending some 1.8% of its GDP on defence. It imports about 70% of defence equipment, a proposition the government wants to change,” Mr Jaitley had told a gathering at a recent industry meet.

* Finalisation of the SP policy will unlock billion dollars worth of defence projects for the public and private sector. The policy besides paving the way for India becoming a manufacturing economy instead of being a mere buyer of defence equipments will also create thousands of local jobs to support these major defence programs under the policy.

* Jaitley, who has just returned from a trip to Tokyo is of the view that foreign companies need to be incentivised to set up defence manufacturing bases in India.

* He said the policies have to be in sync with reality and that foreign defence companies will establish manufacturing units only if there is a likelihood that they will get business.

* In the context of defence, Jaitley said that the government is the only buyer and, therefore, people will establish units only if there is a likelihood of them getting business. Therefore he said that policies have to be tuned to this reality so that it is worthwhile for companies to set up manufacturing bases in India.

(With inputs from —
​Thanks and Regards.

Anupama Airy
Founder and Editor of News Websites and
Twitter handle: @anupamaairy​

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