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India's Defence Ministry on Wednesday updated its latest Defence Procurement Procedure (DPP), released in 2016, with the addition of a seventh and final chapter on the Strategic Partnership model for manufacturing defence equipment.
The Strategic Partnership policy envisages the establishment of long-term partnerships with qualified Indian industry majors, which would tie up with global original equipment manufacturers, and seek technology transfer and manufacturing know-how to set up domestic manufacturing infrastructure and supply chains in defence manufacturing.
Four sectors have been finalised for the model at present - fighter aircraft, helicopters, submarines and armoured fighting vehicles and main battle tanks.
"Revitalising Defence Industrial Ecosystem Through Strategic Partnership" says there is a need to "institutionalise a transparent, objective and functional mechanism to encourage broader participation of the private sector, in addition to capacities of DPSUs/OFB (defence public sector undertakings/the Ordnance Factory Board), in manufacturing of major defence platforms".
"The SP is expected to play the role of a system integrator by building an extensive eco-system comprising development partners, specialised vendors and suppliers, in particular, those from the MSME sector," the chapter holds, adding that the selection will be based on "broad parameters of financial strength, technical capability and capacity and infrastructure".
It also said that since private sector in India has very limited experience in defence manufacturing, the selection will primarily be based on their experience and competence in integration of multi-disciplinary functional system of systems, engineering and manufacturing.
To ensure competition, final selection will be guided by the price quoted by the potential strategic partners.
The strategic partner company has to be an Indian company, which means the company must have more than 50 percent Indian ownership, and Foreign Direct Investment (FDI) will be capped at 49 percent. Presently, the government allows 100 percent FDI in defence, through a government approval route, in cases it results in access to modern technology in the country or for other reasons to be recorded.
Any change in shareholding of a company chosen as a strategic partner can be done only with the government's approval.
An institutional and administrative mechanism for effective implementation of the Strategic Partnerships will also be set up within the Defence Ministry.
As per the procedure, government will issue an Expression of Interest to Indian companies, and the applicants will be shortlisted on the basis of minimum qualification criteria, divided into segments, and a segment-wise Request For Proposal will be issued to those shortlisted.
The companies will then have to submit a techno-commercial offer in response, in collaboration with one of the short-listed original equipment manufacturers.
Field trial evaluations will also be held and lowest bidder will be selected.
Eventually, the contract will be negotiated and finalised.
The policy was finalised by the Defence Acquisition Council on May 20, and the Union Cabinet took note of it on May 24.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)