More reports on: Government policies, Defence production

Private role in defence production may be finalised this month

08 May 2017

The defence ministry is looking to finalise the long-awaited 'strategic partnership' policy for private sector participation in defence production, with defence minister Arun Jaitley to chair a meet of the defence acquisitions council (DAC) on the issue on 11 May.

The meeting will pursue the reports of the Dhirendra Singh and V K Aatre expert committees, which proposed the nomination of Indian private sector defence companies as strategic partners with global armament companies to jointly produce weapon systems under the "Make in India" policy.

The broadly identified segments in Group-1 are aircraft, helicopters, aero engines, submarines, warships, guns and artillery, and armoured vehicles like tanks, says a Times of India report. Metallic materials and alloys, non-metallic material and ammunition (including smart munitions) figure in the technology areas in Group-2.

The SP policy was to be part of the new Defence Procurement Procedure (DPP), which came into effect in April 2016, but has not been finalized till now. This has delayed the proposed projects for a new fighter production line as well as the Rs70,000 crore project to build six new-generation stealth submarines, which was granted "acceptance of necessity" way back in November 2007, the TOI says.

A major bone of contention in the SP policy has been the recommendation that only one private sector company be selected as the strategic partner in each of the seven segments in Group-1, while two are to be nominated in each category in Group-2.

Moreover, it was proposed that only those private sector companies be selected that have adequate financial strength (Rs4,000 crore in annual turnover for Group-1 and Rs500 crore in Group-2), demonstrable manufacturing expertise and ability to absorb technology from their foreign partners. "Transparency and some competitive selection" will be features of the SP policy.

It is well recognised that India needs to encourage a larger role for the private sector in defence production as well as drastically overhaul the functioning of the five defence public sector undertakings, four shipyards, 41 ordnance factories and the Defence Research and Development Organisation and its 50 labs to build a strong domestic defence industrial base.

Otherwise, India will remain in the embarrassing and strategically vulnerable position of having to import over 65 per cent of its military hardware and software.

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