The ‘strategic partnership’ (SP) model, which was approved by the Defence Acquisition Council (DAC) on Saturday, does not address the issue of work share for the MSMEs. Sources told FE that at the Cabinet Committee on Security (CCS) meeting scheduled on Wednesday, the government may further clarify the issue of work share for the MSMEs. In the ecosystem that will be created, the MSMEs will play a ‘major role’, they said. In the developed defence markets, including the US and Europe, MSMEs contribute more than 50% in the value chain of any military platform. The past experiences with defence PSUs, including the Ordnance Factory Board, Hindustan Aeronautics and the shipyards, have shown very little work being outsourced.
Top sources told FE that this is one of the reasons why the Tier I, II & III chains have failed to develop in spite of the DPSUs being in the defence production for the last 50 years. Some of the broad contours cleared so far include: One SP, One Group; there will be financial gates, technology gates; process expected to be kept simple to avoid any subjectivity. One of the key factors in the SP model would be the level and depth of Transfer of Technology (ToT).
Ficci president Pankaj R Patel said: “The involvement of the Indian private sector as strategic partners in hi-tech defence manufacturing will germinate the requisite growth shoots for ‘Make in India’ in defence and aerospace manufacturing.”
Sharing his views, defence firm MKU’s managing director Neeraj Gupta said: “This policy will be a game changer for the Indian industry. The mechanism for inclusion of the MSME sector should also be defined to ensure that the benefits are spread across the sectors.” “The resulting ecosystem will lead to development and growth of MSMEs, job creation on a mass scale and will serve as a momentous boost to India’s defence ambitions,” said Puneet Kaura, managing director and CEO, Samtel Avionics. According to him, “the SP model is one more step towards building an ecosystem of vendors and promoting the indigenous manufacturing industry. The anticipated trickle-down of orders and technology transfer would benefit companies like Samtel. It further outlines the commitment made by the Indian government to promote the domestic manufacturing industry.”
In the new policy cleared by the DAC, four segments have been approved in Phase I, including 6 submarines under Programme P 75 valued at Rs60,000 crore, with OEM in contention French companies, including DCNS and ThyssenKrupp. On the Indian side, the two SP contenders would be Reliance Defence and Engineering (RDEL) and L&T.