Policy

Warships, subs: Centre may allow one firm to have multiple strategic tie-ups

Nayanima Basu New Delhi | Updated on January 20, 2018

To promote construction under Make in India initiative

In an effort to boost technology-intensive construction under Make in India in the defence sector, the Defence Ministry is considering the option of allowing one firm to be a strategic partner in more than one segment, especially in areas such as submarines and warships.

The issue was discussed during the talks to finalise the chapter on strategic partnerships (SP) in the revised Defence Procurement Procedure, said sources.

Meeting of sub-groups

The idea, which proposes allowing a single company to be a strategic partner in related segments, was extensively discussed during a meeting of the sub-groups, chaired by Defence Minister Manohar Parrikar. The suggestion was made by the sub-group on submarines, formed under the aegis of industry bodies such as CII and FICCI, and representatives from Defence Research and Development Organisation, Naval Headquarters, representatives of the expert group and the Ministry.

A senior official, involved in the talks, told BusinessLine: “One company should be allowed to be strategic partner in related segments. If an Indian firm is made strategic partner in submarines, then the same firm should also be allowed to be a strategic partner in warship segments because the infrastructure and technology is the same in constructing these. This is what is practised globally.” The sub-group also highlighted that submarine construction requires long gestation period compared with other platforms. Therefore, it is imperative to factor in the contractors that enter long-term partnerships.

“The sub-group observed that constructing technology-intensive platforms, like submarine, requires extremely high level of competence and capabilities on the part of a partner to be able to deliver value to MoD through cost and time efficiency. The committee also agreed that infrastructure required for submarine construction is highly capital-intensive and that relative evaluation of such companies would need to consider the impact of having made such investments in creating infrastructure as also the specific capabilities necessary for submarine construction,” said a FICCI presentation.

A case in point is Mazagaon Dock Ltd, which is involved in making submarines through technology transfer with French firm DCNS and is also engaged in constructing warships.

Published on June 16, 2016

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