In a major decision, the defense ministry approved procurement of 111 utility helicopters for the navy at a cost of over Rs 21,000 crore. The ministry cleared procurement proposals worth nearly Rs 46,000 crore which included the acquisition of the helicopters. The decisions were taken at a meeting of the Defence Acquisition Council (DAC) chaired by the defense minister Nirmala Sitharaman.
The Defence Acquisition Council also granted approval to other proposals amounting to around 25 thousand crore rupees. This includes procurement of 150 Indigenously Designed and Developed Advanced Towed Artillery Gun Systems for the Indian Army at a cost of around 3,365 crore rupees.
The strategic partner model is intended to enhance competition, increase efficiencies, facilitate faster and more significant absorption of technology, create a tiered industrial ecosystem, ensure the development of a wider skill base, trigger innovation and enable participation in global value chains as well as promote exports.
Under the model, the government intends to boost private sector participation and create domestic expertise in four key areas, namely, fighter aircraft, helicopters, submarines, and armored vehicles and main battle tanks.
One company would be selected for each area based on its competence, which would then tie up with the foreign Original Equipment Manufacturer selected through the procurement process, to build the platform in India with significant technology transfer.
The SP model, if implemented well, is likely to have a number of benefits for both the private sector and the larger Indian defense industry.
From the private sector’s point of view, the biggest benefit would be the opportunity to participate in some big-ticket contracts – estimated to be worth over two lakh crore rupees in the initial phase of execution ¬– which were hitherto reserved for the DPSUs and OFs.
At the same time, the model would also go a long way in bridging the long-standing trust gap between the Indian private sector and MoD, with the latter perceived to be friendlier toward public sector entities.
Strategic Partners, being private sector companies, are expected to exploit their dynamism, competitiveness, profit orientation, and exposure to the civilian sector for efficient utilization of the technology, manpower, and infrastructure developed in the process.
The model has a long-term vision of promoting India as a manufacturing hub for defense equipment thus enhancing self-sufficiency and establishing an industrial and R&D ecosystem, capable of meeting the future requirements of the Armed Forces.
Despite potential benefits, there are two concerns which need to be addressed to make SPs contribute in a meaningful and time-bound manner.
The first and foremost concern is the lack of institutional capacity and ability to guide the new process to its logical conclusion.
There is also a concern regarding the long-term viability of SPs largely due to the privileged position enjoyed by public sector entities.
Time and again, the MoD has deviated from its own promise of fair play in an award of contracts and handed over large orders to DPSUs and OFs on the nomination. It would be futile to expect SPs to make major investments if the government does not provide a level playing field to the private sector.