Rs 21,738 crore (Rs 217 billion) naval chopper to be first “strategic partner” procurement

Delay stems from need to draft separate selection criteria for each category -- fighters, choppers, submarines and tanks

By Ajai Shukla

Business Standard, 21st July 18

In a statement that will be welcomed by private Indian defence firms and global “original equipment manufacturers” (OEMs), Defence Production Secretary Ajay Kumar indicated on Wednesday that the defence ministry was giving full importance to the “strategic partner” policy.

After a meeting of the US-India Defence Technology and Trade Initiative (DTTI) in New Delhi, Kumar made it clear that India’s defence industry would need to partner foreign OEMs for manufacturing defence equipment in India.

He said Indian firms’ contribution towards equipping the military would have to be “in partnership with foreign OEMs to begin with.”

To provide the policy framework for such cooperation, the defence ministry had promulgated the SP Policy in May 2017. This envisaged Indian firms tying up with selected foreign OEMs to manufacture arms in India using transferred technology.

The SP Policy initially aimed at four categories of defence platforms – fighters, helicopters, submarines and armoured vehicles. 

Since then, however, the defence industry has waited in vain for lucrative SP projects to be tendered. In the SP pipeline are 110 medium fighters for the air force, 123 naval multi-role helicopters (NMRH), 111 naval utility helicopters (NUH) and six conventional submarines under Project 75-I.

Defence ministry sources say the delay stems from the need to draft separate selection criteria for each equipment category. “The factors governing a submarine project are different from those in, say, a fighter or tank project. So we are drafting separate rules for each equipment category. These will be category-specific appendices to the main SP Policy,” explains a senior official.

Business Standardlearns that the first appendix, which the ministry hopes to make public by September, will deal with helicopter manufacture. That would allow the navy to start the process of building the NMRH and the NUH, for which the ministry has green-lighted an expenditure of Rs 21,738 crore (Rs 217.38 billion).

The policy framework is nearly ready for the Project 75-I submarine programme too, says a senior defence ministry official. About speculation that the contract will simply be handed to the defence public sector undertaking (DPSU) Mazagon Dock Ltd (MDL), the official clarified: “MDL can certainly compete for the tender, since the SP Policy does not rule out DPSU participation. But we are committed to building the submarines under the SP route, so the private sector can compete too.”

On media reports that Moscow has approached New Delhi with a proposal for building the submarines under a government-to-government arrangement, the official said that that would not be possible, since this is an SP project.

Officials say it will take longer to finalise the SP model for fighter aircraft. However, there is time in hand since the air force would take four-six months to examine vendor responses to the “request for information” (RFI), which were submitted on July 6. 

“We will have the entire policy in place soon. However, if we can finalise even one category in a month or two, it will add to our credibility and that of the SP model.

The National Democratic Alliance government is eager for some success on Make in India in defence production, which has not yet delivered results that could be held up as a success in next year’s general election campaign.

Answering a question in Parliament on Wednesday, the defence ministry stated: “During the last three years and current year (upto June, 2018) out of total 168 contracts, 106 contracts have been signed with Indian vendors.” The equipment included helicopters, radar, ballistic helmets, bulletproof jackets, artillery guns, simulators, missiles, ammunition and fuzes.

However, a significant share of the contracts signed with Indian vendors finds its way to foreign suppliers, since even ostensibly “Indian” equipment contains a large percentage of foreign components, assemblies, sub-systems and systems.

Even so, Indian private firms are keenly anticipating SP route procurements. In Parliament today, the defence ministry stated that, till June, the government had issued 379 licenses to 230 Indian private firms for defence manufacture. “Till June 2018, 70 licensed companies, covering 114 licenses, have reported commencement of production,” said the ministry.