1. Indian private defence industry divided over strategic partnership

Indian private defence industry divided over strategic partnership

The Indian private defence industry is divided over the issue of the government's proposed "strategic partnership" agreement with entities in critical projects

By: | New Delhi | Published: April 26, 2016 11:25 PM
The differences came out during a meeting of representatives from various industry chambers and Defence Minister Minister Manohar Parrikar last evening. (Reuters) The differences came out during a meeting of representatives from various industry chambers and Defence Minister Minister Manohar Parrikar last evening. (Reuters)

The Indian private defence industry is divided over the issue of the government’s proposed “strategic partnership” agreement with entities in critical projects, with some big players batting for it while others pushing to delay it by at least five years.

The differences came out during a meeting of representatives from various industry chambers and Defence Minister Minister Manohar Parrikar last evening.

Parrikar had met members from CII, FICCI, ASSOCHAM and PHD Chamber of Commerce and Industry, besides small and medium defence enterprises’ grouping Defence Innovators and Industry Association (DIIA), to take their views on the partnership agreement that the government plans to enter into with private firms in critical defence projects like manufacturing of submarines and fighter planes.

Defence sources said the meeting went off “very well” and it was “very positive”.

The minister was of the view that since it was only the first meeting, more meetings would be required over the next two months before some sort of decision is firmed up.

Parrikar will now meet individual companies, sector- wise over the next few weeks and try to allay any apprehensions and get fresh inputs.

Industry sources said the minister was “very keen” to get the feedback and has told them to give strong arguments for or against the strategic partnership.

The sources said Parrikar was of the view that he will do what is needed in the interest of the country.

They said two companies wanted strategic partnership to be pushed fast especially in two critical sectors.

However, some were of the view that the whole process should be pushed back by five years so that Indian companies are able to understand and bring out their core strength and stop creation of any monopoly.

“There are so many Indian companies that are rearing to go. If we limit specific projects to only a handful of companies, nobody would even try to get into that sector because strategic partnership would be for 20 years. It can be done in acutely critical projects but rest should be delayed by at least five year,” a source said.

The feeling among several private industry players is that only the big firms will benefit out of this move.

However, many large firms are not open to the idea since they feel they would be restricted to just specific fields and, therefore, their overall investment and plans will get affected.

The issue of a consortium approach to big defence projects was also discussed, sources said, adding, the majority view was to give the newly introduced IDDM (indigenously designed, developed and manufactured) norm in the Defence Procurement Procedure (DPP) time to materialise.

Amrinder Singh, a member of the Parliamentary Standing Committee on Defence, had recently written to Parrikar against the proposed step saying this would only lead to “crony capitalism”.

At the recently held Defexpo in Goa, various industry leaders had expressed their reservation against the move to create strategic partnership.

Industrialist Anil Ambani, who is eyeing the defence sector through his newly set up Reliance Defence, had welcomed the concept of strategic partners, but said, there needs to be competition in inter and intra segments.

The big players are concerned over a clause that would restrict one company each to the ten broad areas of manufacturing like warships, land systems and submarines.

This means if one company goes into a strategic partnership for projects like submarines, it cannot go in for surface projects like making ships.

A top executive of another defence firm had left everyone surprised with his strong remarks against the concept of strategic partnership.

His argument was that “strategic partnership will lead to a new caste system within the defence sector” and only few companies will benefit.

Former DRDO chief V K Aatre had earlier this year submitted a report to the Defence Ministry recommending guidelines for selecting domestic private firms for strategic partnership.

The Aatre Committee was set up by Parrikar following recommendation by the Dhirendra Singh Committee, which had come out with a report detailing the changes needed for the new Defence Procurement Procedure.

The committee had recommended that for ‘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.

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