Cabinet clears Strategic Partnership model for private manufacturing in defence

The Union Cabinet on Wednesday cleared the long-awaited “Strategic Partnership” model that would encourage big Indian private companies to enter the defence manufacturing space.

Under the "Strategic Partnership" model, the government will shortlist and pick Indian companies, which would have to join hands with foreign firms to manufacture single-engine fighter jets, helicopters, armoured vehicles and submarines.

Under discussion within the government for more than year, the policy was approved by the Cabinet Committee of Security on Wednesday, defence minister Arun Jaitley Jaitley said. The Cabinet nod comes within three days of the approval given by the Defence Acquisition Council.

“Defence preparedness itself necessitates that you produce and manufacture domestically,” Jaitley said.

Several Indian firms like Larsen & Toubro, Mahindra, Tata, Reliance, Bharat Forge and Adani groups are all expected to benefit from the Cabinet decision.

Under the new model, the single engine fighter aircraft and helicopters segment will be open only to the private sector at the moment.

For submarines and armoured fighting vehicles and main battle tank, the defence public sector undertaking and ordnance factories board will also be eligible for competition in the selection process for SPs.

Once the partnership is formed between the Indian companies and the foreign original equipment manufacturer, the government would give an assured order to continue with the production.

The defence ministry decided to include the public sector organisations in the SPs, reversing earlier decision that these state-owned units would be kept out of the competition.

It mimics the US model where all major defence manufacturers like Boeing, Lockheed Martin, Raytheon, General Dynamics and BAE are in the private sector, but operate under strict government control.