Strategic Partnership Model for defence projects

Five years after the strategic partnership (SP) model was introduced to increase indigenous defence manufacturing through collaboration with international arms firms, not a single project has been launched under the much-touted ‘Make in India‘ strategy.

After a lengthy initial shortlisting and tender process, the first Project-75 India (P-75I) project to build six diesel-electric stealth submarines is still a long way from being signed.

Background –

• In a major policy reform intended to promote Make in India in defence manufacturing, the Ministry of Defence (MoD) announced in 2017 the much-anticipated SP model for the Indian private sector.
• The model, which was first proposed by the Dhirendra Singh Committee (in its 2015 report), is included in the Defence Procurement Procedure 2016 (DPP 2016).

What is the ‘Strategic Partnership’ model?

• The model seeks to identify a few Indian private companies as Strategic Partners who would initially tie up with a few shortlisted foreign Original Equipment Manufacturers (OEMs) to manufacture big-ticket military platforms.
• In the initial phase, the selection of Strategic Partners would be confined to four segments – Fighter Aircraft, Helicopters, Submarines and Armoured Fighting Vehicles (AFV)/Main Battle Tanks (MBT). 
• In each segment, only one Strategic Partner would generally be selected.
• Primary criteria for OEM selection –
  • • The compatibility of their products with the Services Staff Qualitative Requirements (SQRs).
    • Their commitment to provide technology and other assistance to enable their Indian partners to produce in India with maximum indigenisation.
• Parallel to the shortlisting of OEMs, the MoD would also identify a list of Indian companies in each segment based on certain technical, financial and infrastructure-related parameters. 
• These shortlisted Indian companies would then be issued Requests for Proposal (RFP) along with the list of segment-wise OEMs in order to enable them to engage foreign partners and submit bid responses.

Potential benefits –

• From the private sector’s point of view, the biggest benefit would be the opportunity to participate in some big-ticket contracts.
• This will also help in exploiting the private sector’s dynamism, competitiveness, profit orientation, efficient utilisation of the technology, manpower and infrastructure.
• The model would help in bridging the long-standing trust gap between the Indian private sector and MoD.
• Furthermore, because future orders are not guaranteed beyond the initial contract, it is in the best interests of Strategic Partners to consistently increase their competitiveness and core expertise.
• This would contribute to the establishment of a strong and credible foundation for India’s military industrial complex.

Concerns –

• Lack of institutional capacity and ability – In the past, several promising measures, especially those connected with the ‘Make’ and ‘Buy and Make (Indian)’ procedures, have failed to yield the desired results because of these shortcomings.
• Although DPP talks of an appropriate institutional and administrative mechanism, much would depend on how they unfold.
• Lack of reforms – Lack of reforms in the structures and decision-making processes surrounding procurement and production that have inhibited the development of a strong defence industry.
• Concern regarding the long-term viability of Strategic Partners – This is largely due to the privileged position enjoyed by public sector entities.
• Slow execution – All of the SP model projects are stalled, casting doubt on the entire policy.

The P-75 and P-75I projects –

• In 1999, the Cabinet Committee on Security approved a 30-year plan for the Navy to indigenously build and induct 24 submarines by 2030.
• In the first phase, two lines of production were to be established – P-75 and P-75I. Each line was to produce six submarines.
• The P-75 contract was signed in 2005 by the Naval Group, then known as DCNS, in collaboration with Mazagon Dock Shipbuilders Ltd. (MDL).
• The project’s first Kalvari Class (Scorpene Class) submarine was commissioned in 2017.
• Since then, five more submarines have been built. The final one, Vagsheer, was launched in April 2022 and is scheduled to be commissioned in late 2023.
• While P-75 deliveries were delayed, P-75I had substantial delays even before production began, i.e., still far away from the actual contract being inked.
• P-75I is the first project to make six diesel-electric stealth submarines with air independent propulsion for greater underwater endurance, at an initial estimated cost of Rs 43,000 crore.