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Manohar Parrikar’s exit from the Ministry of Defence, is likely to impact the induction of the chapter on ‘Strategic Partnerships’ into the Defence Procurement Procedure (DPP) 2016.
It seems Finance and Corporate Affairs Minister, Arun Jaitley, who is holding additional charge of Defence, is now reviewing the work done so far by his predecessor Parrikar, on the strategic partners model. It is unlikely that there will be any progress on the matter soon, sources told BusinessLine .
Sources also said that Jaitley might shelve the plan of rolling out the strategic partners model altogether as it tantamount to favouring some of private firms who are in the defence business.
The Finance Ministry had been opposing it from the beginning because it believed that the Defence Ministry had no authority to announce policy measures that entailed taking financial decisions.
The Defence Ministry is allowed to take financial decisions on projects worth up to ₹2,000 crore while the Finance Ministry has the power to approve defence programmes worth ₹3,000 crore. Projects going beyond that go to the Cabinet Committee on Security (CCS).
PMO oppositionBesides, within the Defence Ministry there was opposition to the fact that the strategic partners model was only meant for the private sector and not for the Defence Public Sector Units (DPSUs). This was also opposed by the Prime Minister’s Office (PMO), sources added.
However, shelving of the strategic partnership concept is not likely to impact the domestic defence industry while for foreign firms it may mean greater ease of doing business as they will have greater flexibility to choose partners for joint venture.
The strategic partners model for defence production was being spearheaded by Parrikar almost single-handedly. It was one of the major recommendations of the Dhirendra Singh Committee formed to design the new DPP. The objective was to boost manufacturing of defence items through big-ticket contracts within the private sector.
The model is largely divided into segments such as submarines, combat aircraft, warships and helicopters. The idea was to enlist private sector defence companies in each of the segment as strategic partners for long-term contracts. The only two countries which follow this model are US and France.
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