The decision on whether to introduce the crucial chapter on ‘Strategic Partnerships’ into the Defence Procurement Procedure (DPP) 2016 will be taken once the ongoing Parliament session ends on April 12.

“We are at a very advanced stage. Once the session is over, it will happen,” Minister for Finance, Defence and Corporate Affairs Arun Jaitley, had said recently at the ‘Breakfast with BusinessLine ’ meet.

The SP model is aimed at boosting manufacture of defence items through big-ticket contracts within the private sector. It is largely divided into segments – submarines, combat aircraft, warships and helicopters, and armoured vehicles. The idea is to enlist private sector defence companies in each of the segments as strategic partners for long-term contracts. Meanwhile, there is buzz that the Prime Minister will reshuffle the Cabinet once this Parliament session gets over and a full-time Defence Minister will be appointed, who will take a call on the issue, said sources.

Aatre panel

The VK Aatre Committee, set up by the Defence Ministry to formulate the Strategic Partnership (SP) model, had presented its report in April 2016, in which it had suggested one or two SPs for each segment.

This was seen as restricting the role of private Indian defence firms that had objected to the SP model, which was being reviewed by former Defence Minister Manohar Parrikar. However, after Parikkar’s exit from the Ministry, the proposal is being reviewed once again under pressure from the domestic industry.

It is learnt that projects worth ₹50,000 crore are stuck in the absence of the SP chapter. Foreign OEMs have already made it clear that without this chapter, they are unable to form joint ventures with Indian defence firms and there has been a dearth of large-scale defence projects.

“We are eagerly looking forward to the SP model. We are waiting for the guidelines to be issued and the selection of SP to be implemented by the government. DCNS is constantly having its dialogue with the Indian Navy for future warships and submarines to provide the Navy with the most suitable solution to meet its operational requirements,” said Bernard Buisson, MD, DCNS India.

Foreign players have so far stayed away from the foreign direct investment route even though the government has allowed 100 per cent foreign investment.

The idea of selecting SPs and granting preferential treatment to private sector defence players was mooted by the Dhirendra Singh Committee that was formed to design the new DPP. Later the Ministry constituted the Aatre Committee.

“Foreign players can also come under the FDI route since 100 per cent is now being allowed. But it is also true that the SP chapter will bring in some clarity. Selection of private players and how the programmes will be selected remains a question. The guidelines suggested by the task force were not formulated in the right spirit,” said Laxman K Behera, fellow at the Institute of Defence Studies and Analyses.

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