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.
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| L egal E ra | N ovember 2017
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