Strategic partnership will push defence manufacturing, FDI inflow: Jaitley

The government is focused on expanding defence manufacturing in the country and the new strategic partnership (SP) model will supplement the opening of foreign investment in the defence industry, Defence Minister Arun Jaitley said.

Asked if liberalising the policy on foreign direct investment (FDI) in defence has shown any results, the minister said opening foreign investment, which was done in phases ultimately allowing for 100 percent FDI in case of access to 'modern technology', was only meant to open the doors.

"FDI change merely opens the door. They are enabling... They themselves do not ensure that immediately entry of participants will take place," Jaitley said on 1 June.

"The reason is very simple... There is only one purchaser (of defence equipment) within India, that is the government of India. Unless opening of FDI is accompanied by some reasonable possibility of a possible investor getting orders, he is not going to set up an establishment," he said.

The minister said the government is laying "big emphasis" on expanding defence manufacturing within the country.

"There is a big emphasis on expanding defence manufacturing within the country."

He said the government is looking at a "balance" between the defence public sector units, and bringing private sector in defence manufacturing "so that all national resources" is committed to it and "its potential can be unleashed".

He said the strategic partnership policy has been brought for this and it will help in bringing foreign companies either through FDI route or through technology transfer.

"That is why strategic partnership policy has been brought in, because it is going to supplement the FDI policy, whether the SP partner comes through the FDI route or just a tech tie-up, they would be free (to choose)," the Minister said.

The strategic partnership policy envisages the establishment of long-term strategic partnerships with qualified Indian industry majors, wherein the Indian industry partners would tie up with global original equipment manufacturers, to seek technology transfer and manufacturing know-how to set up domestic manufacturing infrastructure and supply chains in defence manufacturing.

It was finalised by the Defence Acquisition Council on May 20, and the Union cabinet took note of it on 24 May. The final policy was uploaded by the defence ministry as the seventh and final chapter of the new Defence Procurement Procedure (DPP) on Wednesday.

Jaitley also said the defence ministry has cleared procurement proposals at an "unprecedented" rate in the last three years, and alleged there was "inaction" during the term of the previous UPA government.

"The manner in which proposals cleared by the Defence Acquisition Council (DAC) over the last three years is unprecedented, when you compare it with the inaction during the previous ten years," Jaitley added.