One of the critical issues in India’s Ministry of Defence (MoD), left in the lurch because of abrupt departure of Manohar Parrikar as Defence Minister earlier this week, is the question of choosing private sector defence manufacturers as Strategic Partner (SP) to make major defence platforms in India.
Officials in the know say a fortnight before he resigned as Defence Minister to become the Chief Minister of Goa, Parrikar and a team of top defence ministry mandarins had come to a consensus on how to proceed on the highly contentious model.
As one official described it, “The fruit is ready for plucking.”
For months, two opposing schools of thought slugged it out in the MoD. Besides the divided opinion in the MoD, there were major differences of opinion among Indian and foreign defence manufacturers on the contours of the SP model. In the MoD, one lobby led by a senior official was batting to retain the primacy of the Ordnance Factory Board (OFB) and Defence Public Sector Undertakings (DPSUs). The other section wanted to keep the OFB and DPSUs out of this model.
Finally, Parrikar, after listening to multiple arguments, forced the issue on February 25 during a longish meeting at his residence. According to those who were part of the deliberations, the model that had been finalised was something like this:
- MoD will put out the criteria to select probable strategic partners with several qualifying benchmarks.
- The benchmarks would include financial turnover, capital assets, and revenue growth while technical parameters would be assessed on at least four or five criterion including past performance, engineering and manufacturing capability, infrastructure facilities, human resource structure and practices, quality control and maintenance and life cycle support system.
- However, contrary to what the Aatre Committee had recommended the selection would not be limited to one company per category; instead at least two or three manufacturers would be shortlisted.
- The next step, in the finalised model is to select the OEM (Original Equipment Manufacturer)—most likely big foreign conglomerates—based again on technical parameters (quantum of technology transfer, government approval etc.)
- Finally, the OEMs would select an Indian strategic partner and then jointly come up with technical and commercial quotes to compete for the final order.
Initially, informed sources say, the SP model would be used to manufacture only fighter aircraft, helicopters and submarines although the Aatre Committee had recommended the application of this model to four categories which were further subdivided under six sub-categories. Broadly, these included aircraft & helicopters and their major systems; war ships & submarines to include major systems; armoured vehicles and their major systems; complex weapon systems which rely on guidance systems for precision hits; and networks to include Command, Control, Communication and Computers, Intelligence, Surveillance, Target acquisition and Reconnaissance; and Critical materials (Titanium alloys, Aluminum alloys, Carbon composites, Nickel / Cobalt alloys etc.)
A week after the meeting at Parrikar’s residence, the draft of the SP model was ready to be put up for final approval. However, political compulsions overtook the policy. It is now up to Arun Jaitley, who now holds the additional charge of defence or any new incumbent who comes in at a later date, to either take this initiative forward or scarp it. Either way, the wait for a viable model to acquire critical weapons platform for the three services has just got a little longer.
Nitin A. Gokhale