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‘Technology transfer key to defence tieup’

YB WEB DESK. Dated: 5/15/2017 4:23:43 PM

The degree of willingness to engage in transfer of technology (ToT) will be the main criteria in deciding whether a foreign defence company can qualify to partner an Indian company to manufacture military equipment under the long-awaited strategic partnership (SP) model, the government has said in a power-point presentation made to Indian defence industry honchos behind closed-doors on Thursday.

“ToT remains the main factor in selection of the OEM,” says the presentation on the planned guidelines to select strategic partners, comprising Indian military equipment making companies and foreign OEMs. The foreign defence company will then be the designated original equipment manufacturer (OEM) to pair the Indian strategic partner.

The presentation, titled “Revitalising Defence Industrial Ecosystem”, made by an Indian Navy officer was part of a 90-minute-long interaction between the government team led by defence minister Arun Jaitley and Indian defence industry officials. The SP model issue is now expected to be taken up in the Defence Acquisition Council meeting on Monday.

In evaluating ToT, the considerations will include “range, depth and scope of technology transfer offered in identified areas, extent of indigenous content proposed, extent of eco-system of Indian vendors/ manufacturers proposed, measures to support SP in establishing system for integration of platforms, plans to train skilled manpower, and extent of future research and development planned in India,” the presentation said.

Other critical criteria that will be considered will be the willingness of the foreign company to help develop an ecosystem in India.

In the PP presentation, only four segments — single engine fighter aircraft, helicopters, submarines and armoured fighting vehicles/main battle tanks — have been identified leaving out the fifth segment — ammunition and macro process management of issues — that found mention in the earlier government documents.

However, the presentation points out that the defence ministry may “add more segments or subdivide the existing ones as the SP model matures”.

While six strategic partners will be shortlisted from among Indian companies for each segment, preferably two or more OEMs would be shortlisted for each segment. And “even if one OEM is shortlisted, the process will be taken forward”.

Finally, only one strategic partner will be selected per segment to maintain focus on core areas.

“One potential SP can engage with any or all OEMs, but finally submit only one offer in collaboration with any one of the shortlisted OEMs,” the presentation said.

Besides the technical and financial requisites, aspects like “wilful default, debt restructuring and non-performing assets” will be considered while selecting the strategic partner. In the final run, the selection will be based on a combination of price bids and segment specific capabilities of the companies.

While the defence ministry will undertake the process to select strategic partners and OEMs in each segment separately, both will be undertaken concurrently.

The SP model is a government-led effort to persuade broader participation of the private sector in defence manufacturing under the “Make in India” framework in order to ensure greater self-reliance and dependability of supplies essential to meet national security objectives.