Govt moves ahead to finalise SP model for defence production

Defence Minister Arun Jaitley today held extensive talks with key stakeholders to finalise the much-awaited strategic partnership model for roping in private firms to produce critical military platforms like fighter jets and submarines in India.
The meeting was attended by 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.
Industry bodies CII, FICCI and PHD Chamber of Commerce were also part of talks besides top officials of the Defence Ministry.
Under the strategic partnership (SP) model, select private Indian defence firms will be allowed to exclusively make various military platforms for a specified period of time.

There has been a debate over whether to select only one private sector company for each of the segments identified for defence indigenisation or look for other options.
"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 defence ministry 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.
If the policy is cleared by the DAC, then it will be sent for consideration of the Cabinet Committee on Security.

The Defence Ministry favours a transparent, open and competitive process instead of a monopoly of one strategic partner
Industry sources 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.
The sources said some officials have 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.
The defence ministry said the SP model is intended to enhance competition, increase efficiencies, facilitate faster and more significant absorption of technology and create a tiered industrial ecosystem 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," said the ministry in a statement.
It said industry representatives welcomed the efforts of the ministry to put in place such a framework and offered several positive and constructive suggestions.

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.