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The Defence Ministry has finally come up with a draft policy that allows it to shortlist so-called Strategic Partners (SPs) and foreign OEMs through separate processes.
The ‘Strategic Partnership’ policy was finalised at the all-important meeting of the Defence Acquisition Council (DAC), chaired by Defence Minister Arun Jaitley on Monday. This was the only agenda of the DAC meet, sources told BusinessLine .
The government has decided that the Original Equipment Manufacturers (OEMs) will be shortlisted based on how they agree to technology transfer and on the quantum of their contribution towards building a defence eco-system in the country under the ‘Make in India’ programme.
The final selection will be done based on a combination of price bids and segment-specific capabilities of the firms. In the first phase, only four broad segments will be identified – single-engine fighter aircraft, helicopters, submarines and armoured vehicles or main battle tanks, a source in the know said.
Depending on the success of the first phase, the Defence Ministry may add more segments or sub-divide these as SP model matures, the source added.
Much to the chagrin of the industry, the Ministry has decided that only one SP will be selected per segment to “maintain focus on core areas and ensure wider participation from industry”.
In the case of selection of OEMs, technology transfer will be the “main criteria”, and that will include extent of indigenous content proposed, training of skilled manpower and future R&D plans in India. The OEMs will be asked to make technical offers in response to the express of interest (EOI) within two months. A maximum of two OEMs will be shortlisted for each segment.
Jaitley had on May 11 met the industry on the issue for the first time after taking over as Defence Minister. During the meeting, the industry appeared to be widely divided on the issues of grand-parenting of projects and price discovery of defence armaments.
Only 49% FDI?The Ministry believes that the SP model will only allow 49 per cent foreign direct investment (FDI) and that there will be no “pyramiding of FDI” in the Indian holding companies by foreign partners, so that the key decision-making rests in the hands of the Indian firm.
Deals that are stuck include the acquisition of naval utility helicopters (NUH) for ₹20,000 crore, P-75 Scorpene submarine programme for ₹60,000 crore, and the fighter jet deal for single or twin-engine worth about ₹1,00,000 crore.
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