India approved on Wednesday a long-awaited policy to boost local defence manufacturing by effectively picking industry champions that would tie up with foreign players and make high-tech defence equipment. Prime Minister Narendra Modi has vowed to end India’s role as the world’s largest arms importer by getting foreign firms to impart technology to local players and then manufacture in India. Under the “Strategic Partnership” model, the government will shortlist and then pick Indian companies to join forces with foreign firms to supply fighter jets, helicopters, armoured vehicles and submarines.
“For each platform, one private sector strategic partner will be chosen,” Defence Minister Arun Jaitley told reporters after the cabinet’s Committee on Security cleared the policy. He said the policy was designed to encourage manufacturing by assuring the selected companies of future orders. “You don’t set up a manufacturing facility if you don’t have any hope of getting orders,” he said.
Government and industry representatives have been haggling over the details of the model for more than a year, delaying the launch of tens of billions of dollars worth of deals.
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Indian firms Larsen & Toubro, Mahindra Group, Tata Group and recent entrants Reliance Group and Adani Group are all expected to compete fiercely to become one of four strategic partners. Foreign manufacturers such as Lockheed Martin, Boeing, BAE Systems, Airbus and Saab are looking to India as one of the biggest sources of future growth.
Modi and Jaitley were keen to get the project approved before the prime minister completes three years in office on May 26. Modi then heads off next Monday to Germany, Spain and Russia, where defence procurement will be high on the agenda. In June Modi is expected to visit the United States, which has emerged as one of the top arms supplier to India in recent years.