Article Posted on : - May 16, 2017

NEW DELHI (PTI): The Defence Acquisition Council (DAC) on Monday discussed the much-awaited 'strategic partnership model' under which select private firms would manufacture fighter jets, helicopters and submarines in India in partnership with foreign companies.

Defence Ministry sources said the DAC, chaired by Defence Minister Arun Jaitley, made "forward movement" towards finalising the 'strategic partnership (SP) model', covering "substantial ground".

Under the SP model, select Indian defence firms will be allowed to exclusively build various military platforms for a specified period of time in partnership with chosen foreign entities.

The sources termed the outcome of the deliberations "positive".

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

Opinion is divided on whether to select only one private sector company for each segment identified for defence indigenisation or look for other options.

The Defence Ministry has been maintaining that it was working towards institutionalising a transparent, objective and functional mechanism to encourage broader participation of the private sector in defence manufacturing.

The DAC may again deliberate on some of the issues relating to the proposed SP model before it is taken up by the Cabinet Committee on Security.

At last week's meeting, some industry representatives had favoured a level playing field and expanding the industry base by allowing entry of new players. Some stressed on exercising caution and ensuring that the model does not block the flow of new technology to the sector.

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

The proposed model envisages 'sequential award' of contracts for four selected segments, and some industry representatives felt such arrangements will lead to delays in implementation of mega projects.

The SP model was proposed by the Dhirendra Singh Committee in July, 2015. It had said 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.