Parrikar may unveil key ‘strategic partnerships’ policy at Aero India

Defence Minister Manohar Parrikar is likely to announce the much-awaited policy on ‘strategic partnerships’ (SP) during the Aero India show starting Tuesday at the Yelahanka Air Force Station in Bengaluru.

The policy is crucial to kickstart defence deals worth over ₹2-lakh crore across segments.

The chapter on ‘strategic partnerships’ within the Defence Procurement Procedure (DPP) 2016 assumes great significance because the investments to be made by domestic and foreign OEMs (original equipment manufacturers) to make critical armaments for the armed forces depend on that.

Parrikar had released the DPP 2016 officially on March 28 at the Def Expo. But, since then, the DPP had been devoid of its most crucial Chapter VI on strategic partnerships. However, it seems that the Ministry is now ready with it, and Parrikar is all set to unveil it on February 14, sources told BusinessLine .

While the Ministry is keen on having two SPs in each segment, the industry wants foreign partners to be allowed in these segments.

This is because some big players, such as the Tata Group, L&T, Mahindra and Reliance Defence, are lobbying to be strategic partners in segments like aircraft, submarines and helicopters.

“It is crucial that the government now releases the chapter without which the DPP has no meaning. A number of big-ticket deals are stuck because of this. All these deals will go through once the strategic partnership policy is released because foreign companies do not want to move ahead without that.

“Having said that, I see no reason why foreign OEMs cannot begin their work under the old SP policy,” said a top official in an Indian defence firm.

Under the SP policy, an Indian company designated to be a strategic partner in a segment will become the automatic choice of foreign OEMs looking to produce that particular weaponry.

Additionally, the foreign partner owns up to 49 per cent stake in the joint venture.

This year, Aero India atmospherics are expected to heat up as global warplane makers, such as the Saab Group with its Gripen E and Lockheed Martin with its F-16, will jostle to join the Indian Air Force (IAF), which is in the market for a single-engine fighter plane under a $2-billion deal.

Both these companies and several other foreign OEMs are also waiting to bag billion-dollar defence production deals in various segments.

Some of the deals that are stuck are 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 ₹100,000 crore.

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