Being Realistic On Strategic Partnerships And Technology Transfer

The real problem with India’s OFB and DPSUs should not be seen in terms of their “indigenisation” efforts, which, under the terms of their contracts, seem to be quite good, but rather in the excessive delays and cost overruns associated with manufacturing inefficiency as well as poor quality control which makes the foreign partners uneasy, writes SANJAY BADRI-MAHARAJ

- Sanjay Badri-Maharaj

In May 2017, India’s Defence Acquisition Council (DAC), chaired by then Defence Minister Arun Jaitley, approved and finalised a new policy that allowed private firms to enter into agreements as “strategic partners” with non-Indian original equipment manufacturers (OEMs) for certain types of systems. These systems were to include single-engine fighter jets, helicopters, submarines, and armoured vehicles. At its heart, these reforms are designed to enable a more capable and effective defence industrial base in India with the private sector entering a sector hitherto dominated by public sector undertakings which have issues with cost overruns and delays.

The policy does have perceived shortcomings, however, as the new policy will require private sector “strategic partners” to work with non-Indian OEMs in joint ventures, which could lead to unfavorable risk-sharing for Indian firms.

The New Policy

New Delhi’s indigenisation and shortterm security needs have inevitably led to a clash of priorities whereby defence deals have created lengthy delays as negotiations with OEMs or with foreign governments have faced inordinate delays. At least in part, these are complex causes and invariably led to competing priorities where defence deals with external OEMs and governments are bogged down in lengthy and complex negotiations over offset clauses, technology transfer agreements, and the extent to which technology is to be transferred along with intellectual property rights.