* Cabinet approves key Strategic Partnership model
* Selected local firms to be guaranteed orders
* Firms await final details amid some doubts
* India world's biggest arms importer; Modi vows change
(Adds details, quotes, context)
By Tommy Wilkes
NEW DELHI, May 24 India approved on Wednesday a
long-awaited policy to boost local defence manufacturing by
effectively picking industry champions that would tie up with
foreign players to make submarines, fighter jets, helicopters
and armoured vehicles.
Prime Minister Narendra Modi has vowed to end India's role
as the world's largest arms importer by asking foreign firms to
share technology with local players and then manufacture in
India - in return for a slice of the $250 billion analysts
estimate New Delhi will spend on its military over the next
Under the "Strategic Partnership" model, the government will
shortlist and then pick Indian companies to join forces with
foreign firms. The winners will be guaranteed billions of
dollars of orders to incentivise them to manufacture.
"For each platform, one private sector strategic partner
will be chosen," Defence Minister Arun Jaitley told reporters
after a cabinet meeting. "You don't set up a manufacturing
facility if you don't have any hope of getting orders."
Government and industry representatives have been haggling
over the details of the model for more than a year, delaying
discussions for tens of billions of dollars worth of deals.
Indian defence manufacturing is small and dominated by
state-run outfits, many of which have been criticised for poor
performance. Private firms such as Larsen & Toubro,
Mahindra Group, Tata Group and recent entrants Reliance Group
and Adani Group are desperate to muscle in on their business.
Foreign manufacturers such as Lockheed Martin,
Boeing, BAE Systems, Airbus and Saab
also see India as one of the biggest sources of
Modi was keen to get the project approved before he travels
next Monday to Germany, France, Spain and Russia, where buying
weapons will be high on the agenda.
Among the long-awaited orders that executives hope the new
policy could kick-start are a multi-billion-dollar submarine
tender and another for a large number of single-engine fighter
jets the Indian Air Force says it needs.
Lockheed Martin and Saab are in the race for the fighter
jets, while companies in Germany, Spain, Russia and France are
likely to be interested in the submarine tender. Actual orders
could still be years away, as India's procurement process often
moves slowly and specific details of how the policy will work
have yet to be released.
In June, Modi is also expected to visit the United States,
which has emerged as one of the top arms suppliers to India in
India wants to replicate other countries that have used
state policy to build leading defence firms.
Some executives and analysts have said the new policy could
undermine competition and hand winning Indian firms a virtual
monopoly, but the government decided it has reached enough of a
consensus to push the policy through.
"We see the policy as doing something good for
indigenisation," Jayant Patil, Head of Defence and Aerospace at
& Toubro, India's largest private sector engineering firm, told
Patil said that industry representatives had raised concerns
in recent meetings about how the policy would be structured,
specifically on the financial and technical criteria used for
"The final details are still awaited. We discussed some
roadblocks but we hope they will be addressed," he said.
Larsen's "unmatched competency" lay in submarines, Patil
said, suggesting it would focus on winning that strategic
Some Indian companies are unhappy with a rule restricting
them to becoming a strategic partner in just one of four sectors
that will be the first covered by the policy - submarines,
fighter jets, helicopters and armoured vehicles.
Companies such as Reliance, a newcomer to defence, had laid
out ambitious plans to build anything from submarines to
helicopters and missiles, but the strategic partnership model
will likely force it to narrow its focus.
Tata, Mahindra and Reliance have all invested money in
According to draft guidelines of the model seen by Reuters,
the government will use a range of technical and financial
criteria to shortlist six Indian companies and several foreign
The two groups of companies will then begin talks to pitch
jointly to the government, with New Delhi choosing the winning
team, based in part on how much technology the foreign companies
are prepared to transfer to their Indian partners.
"With all the effort that has gone into finalising the
policy, it can potentially be a turning point in India's
endeavour to have a robust homegrown private defence industrial
base," said Pierre de Bausset, President of Airbus in India.
"We will assess the policy fine print when it is released."
(Reporting by Tommy Wilkes; Additional reporting by Sanjeev
Miglani, Douglas Busvine and Nigam Prusty; Editing by Gareth
Jones and Alex Richardson)