Strategic Partnership Model in Defence

The Strategic partnership Model was first proposed by the Dhirendra Singh Committee in July, 2015. It has been recently adopted by the NDA government under its Make in India programme to increase the participation of domestic private firms as well as foreign firms in defence manufacturing in the country.

Rationale

Defence production in India is currently dominated by state-owned manufacturers and lacks autonomy and modernisation. India spends huge amount on defence as evident from the recent report of Stockholm International Peace Research Institute (SIPRI), which says that India is world’s largest defence importer during 2012-16. The Union Budget 2017-18 has allocated Rs. 3,59,854 crore to the Ministry of Defence and most of this amount goes for defence acquisition. Still, India can’t even compare to its neighbour China in modern warfare and has been unable to protect its borders from being intruded by the militants. The major problem behind this is lack of high levels of indigenisation in this sector. The “strategic partnership model” is aimed at making efforts to stimulate defence manufacturing ecosystem in the country through involvement of Indian as well as foreign firms.

Salient features of the Model

• At initial stages, the policy is expected to be implemented only in few selected segments viz. fighter aircraft, submarines and armoured vehicles. Government may add additional segments to it in future.
• This model involves creating two separate pools of Indian private companies and foreign OEMs
• It promotes competitive bidding for project procurements, but also allows the Indian companies to tie up with a foreign OEM

How will the Model be beneficial to the country?

The strategic partnership model can act as a game changer not only for the defence sector but for overall economy. It can help the country in several ways. Firstly, it promotes high levels of indigenisation, helping the country to become self-reliant in this sector, which was elusive till now. Secondly, being a manufacturing sector, it has humongous potential to generate employment, the much needed by the country. Thirdly, it provides a lucrative option for Indian private sector and start-ups. Their investment in this sector would help the country to stimulate its GDP growth rate. Fourthly, it would reduce foreign procurements of defence equipments, thereby, reducing the wastage of our foreign reserves. Finally, it would generate healthy competition between private sector firms and state-owned firms, thus providing state-owned firms with opportunity to come at par with private sector.

Problems associated with this initiative

Though the initiative seems to have huge potential, yet there are some bottlenecks in its execution. First, the initial cost involved in developing such defence ecosystem is very high. As per a report, if India manufactures Kamov helicopters domestically, it would cost India nearly 2.5 times what it pays to Russia for the same. Second, it is for sure that once the manufacturing unit will be set up, it would not only focus on domestic requirement but also try for export the products. But Indian logistics sector is still one of the major challenges for country’s export oriented programmes. Third, setting up a manufacturing industry requires large tracts of contiguous land. Since land is a state subject in our country, its procurement would be time consuming process.

End Notes

The policy can be considered a great initiative in larger national interest as it promotes indigenisation and has extreme potential to generate employment. The huge initial cost can be neglected for the time being as it is one time cost. Once the manufacturing starts, it would balance the cost within 5-10 years time period, and the investment will prove profitable. It will finally prove to be a capacity building initiative for not only the private sector but also of Indian public sector in defence manufacturing.