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Government finalises policy to allow private investment in defence

May 20, 2017 19:42 IST

The Defence Acquisition Council on Saturday finalised the broad contours of a much-awaited policy under which select private firms will be roped in to build military platforms like submarines and fighter jets in India in partnership with foreign entities.

Seen as a major initiative, the 'strategic partnership model' aims to create a vibrant defence manufacturing ecosystem in the country through involvement of both the major Indian corporates as well as the MSME sector.

The DAC, chaired by Defence Minister Arun Jaitley, held in-depth deliberations on the new policy for the second time this week and decided to give a go-ahead to it.

Initially, the policy is expected to be implemented for manufacturing fighter aircraft, submarines and armoured vehicles. It is expected to be expanded to other segments at a later stage.

The policy is likely to be examined by the finance ministry before being considered by the Cabinet Committee on Security.

"Breaking new ground, the DAC under the chairmanship of Defence Minister, Arun Jaitley, today finalised the broad contours of a policy aimed at engaging the Indian private sector in the manufacture of high-tech defence equipment in India," the defence ministry said in a statement.

It said the policy envisages establishment of long-term strategic partnerships with Indian defence majors through a transparent and competitive process wherein they would tie up with global OEMs to seek technology transfers to set up domestic manufacturing infrastructure and supply chains.

"The policy will give a boost to the 'Make in India' policy in the defence sector and set Indian industry on the path to acquiring cutting-edge capabilities which will contribute to building of self-reliance in the vital sector,"the ministry said.

Referring to sectors identified to implement the policy, it said additional segments may be added in future.

"Appropriate institutional mechanisms will be set in place to implement the policy," the minister said.

Last week, Jaitley had a meeting on the SP model with representatives of defence arms of leading groups including Larsen and Toubro, Ashok Leyland, Mahindra and Mahindra, Reliance Infra, Tata Group, Punj Lloyd, Adani Group and Bharat Forge Ltd.

At that meeting, some industry representatives had favoured a level playing field and expanding the industry base by allowing entry of new players.

It was learnt that some officials had also raised concern about possible "judicial intervention and federal audit" in case of award of successive orders to one 'strategic partner'.

The SP model was proposed by the Dhirendra Singh Committee in July, 2015. It had said that for the 'Make in India' initiative to become wider in the defence sector, the government should adopt a strategic partnership model, whereby a private firm is chosen for the development of a specific identified platform.

Last year, the then defence minister Manohar Parrikar had announced that the policy on SP model would be unveiled soon.

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