FOR STRATEGIC PARTNERSHIP MODEL IN DEFENCE

NEWDELHI: The Union Cabinet has approved the much-awaited strategic partnership model that will allow local private sector companies to form manufacturing joint ventures with foreign defence equipment makers—a shot in the arm for the government’s ‘Make in India’ programme as well as efforts by the Indian private sector to make inroads into the lucrative defence equipment business.

“The capacity building of the private sector in defence (equipment) manufacturing will begin now,” finance and defence minister Arun Jaitley said after the Cabinet meeting.

Indian firms Larsen and Toubro Ltd, Ashok Leyland Ltd, Mahindra and Mahindra Ltd, Reliance Infrastructure Ltd, Tata Group, Punj Lloyd, Adani Group and Bharat Forge Ltd, which have existing defence businesses, are likely to benefit the most from the decision.

A February 2015 report by lobby group Ficci and Centrum Capital estimated that by 2022, the annual opportunity for Indian firms, both state-owned and private, would be around $41 billion. This could increase thanks to the new policy.

The defence industry is dominated by state-owned manufacturers, including HAL. Jaitley said the policy was designed to ensure firms do get orders. “You don’t set up a manufacturing facility if you don’t have any hope of getting orders,” he said.

Under the “strategic partnership” model, the government will shortlist and pick Indian companies to join forces with foreign firms to make fighter jets, helicopters, armoured vehicles and submarines.