Legal Era Nov 2017 | Page 57

TAKE ON BOARD pattern/ownership of the SP shall require prior approval of MOD. In terms of ensuring quality, it is provided that the OEM will be jointly responsible along with the SP for certification and quality assurance of platforms supplied to MOD. The Policy lays down a broad procedure for selection of SP: a) Issue of expression of interest (“EOI”) to Indian private companies for selection of SP in an identified segment seeking details of Minimum Qualification Criteria; b) Submission of response to EOI by applicant companies, indicating inter alia choice for segments in which they wish to participate; c) Evaluation of companies based on prescribed Minimum Qualification Criteria; d) Segment-wise verification of segment specific criteria; e) Shortlisting of companies that meet the Minimum Qualification Criteria, for issue of segment-wise request for proposal; f) Issue of segment-wise request for proposal with Defense Acquisition Council (‘DAC’) approval to short-listed companies based on the segment option submitted by them in EOI response; g) Submission of techno-commercial offer in response to request for proposal by companies, in collaboration with one of the shortlisted OEMs, or in exceptional cases, with two OEMs in segments with diverse platforms; h) Opening and evaluation of technical offer of companies; i) Conduct of field evaluation trials and staff evaluation; j) Opening of commercial offers of companies that are technically compliant with the request for proposal, segment-wise; k) Selection of Strategic Partner having the lowest bid, segment-wise, with DAC approval; l) Commencement of contractual negotiations; m) Finalization and signing of contract. The Policy notes that - an appropriate institutional and administrative mechanism for effective implementation of Strategic Partnerships will be set up within MOD, the development of such institutional and administrative mechanism is yet to be undertaken. Industry Reaction Recent initiatives provide India an opportunity to change the status quo and become a key player in the global defense industry and have been lauded by Industry. These initiatives present opportunities for foreign OEMs to enter India and local companies to collaborate and design, develop and showcase their engineering strength. This will also further India’s objective to create jobs, catalyze technology development, and transform India into a self-reliant nation with export capabilities in the defense sector. Encouraged by initiatives taken by the Government, even big Indian conglomerates with no real defense experience have made an entry. For instance, the Adani Group, has tied up with Saab AB, which produces the Gripen fighter jets, to bid for a multibillion-dollar deal. The significant interest manifested from companies such as Boeing, SAAB and Lockheed Martin in partnering with Indian private companies and otherwise having advanced discussions for establishing their manufacturing centers in India, is a positive sign for the Indian defense manufacturing industry and a step closer to India’s growing attractiveness as a defense sourcing hub. The Strategic Partnership policy provides that, ‘only one Strategic partner will generally be selected per segment’ so that it ‘maintains focus on a core area of expertise’. Industry has voiced its concern with respect to the same, and has requested for appropriate changes in the Policy. As per news reports, the government is likely to bring a change in this, which will allow the applicant company to be selected in more than one segment identified for strategic partnership. The foreign OEMs have raised concerns with respect to protection over propriety technology since they will have minority shareholding in the JV as the FDI cap is 49% and have sought governmental protection. Conclusion The Indian government recognizes that opening up of the defense sector to private sector participation will help Foreign OEMs to enter into strategic partnerships with Indian companies and leverage the domestic markets as well as aim at global markets. Besides helping in building domestic capabilities, this will also bolster exports in the long term. Fostering a constructive partnership with the Indian private defense industry is considered not just a sound economic option but a strategic imperative to minimize dependence on imports and infuse self-sufficiency in defense manufacturing. Disclaimer – The views expressed herein are strictly personal to the author(s) and should not be construed as a legal opinion. The author(s) is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission pertaining to this article. www . legaleraonline . com | L egal E ra | N ovember 2017 57