Strategic Partnership (SP) model

• The government’s ambitious Strategic Partnership (SP) model for promoting Indian private industry participation in defence manufacturing has come into effect.

About Strategic Partnership (SP) model

• Under the “Strategic Partnership” model, the government will shortlist and then pick Indian companies to join forces with foreign firms to supply fighter jets, helicopters, armoured vehicles and submarines. For each platform, one private sector strategic partner will be chosen.
• The strategic partnership model was envisioned in order to bring private industry into the fold of defence manufacturing, but under the auspices of well-defined terms of agreement. Given that development and production of weapons platform is a time-intensive process, the idea was to ensure that long-term, regulated partnership for product development and production could be put in place.

Analysis:

• This model does address several problem areas in the procurement process.
• Most importantly it gives the private sector a chance to truly compete. Capabilities rather than just cost will be taken into consideration. MSMEs have been given a chance to prosper.
• Positive spill overs from the strategic partnerships will help MSMEs to develop capacity and many will hopefully move into the above Rs 500 crore bracket, making them eligible for Group II partnerships.
• Strategic partnership model must be viewed as an arrangement that will provide the private sector the fillip for development.
• Ideally, once private sector manufacturing has taken off and the MSME vendor base has developed, all private sectors must be given an equal chance to partner with MoD for development, not just strategic partners, but that is a bridge that is far away.
• If India is to develop a robust indigenous defence manufacturing base outside of the public sector, the private sector needs this opportunity to do so.
• Strategic partnership model aims to create a vibrant defence manufacturing ecosystem in the country through involvement of both the major Indian corporates as well as the MSME sector.

By: Vishal