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Strategic Partnership Model for Private Manufacturing Finalised

Discussion in 'Indian Defence Industry' started by Agent_47, May 20, 2017.

  1. zebra7

    zebra7 Captain FULL MEMBER

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    There can't be a robust and active private venture in the defence industry, because of the lack of the clarity of the strategic planning.

    With lack of clarity means, you need a strategic planning of the road blocks for the system to get developed. Take for example without the clarity of the quantity of the weapon system, why would the pvt. firm would invest in the venture of the R&D. And their off the future and the secondary systems, where such R&D could be implemented. Problem in India is that their is a Tender to supply a weapon system, but no clarity of the road map, thus for the pvt. firm it means that they have to give the product, which qualify the requirement of so so quantity and that's all. But if their is an institution that could work with that OEM to develop the future road map, where they would like that system to grow for the future requirement, and the strategic plan. E.g a tender to supply an AESA radar module means, they need certain amount of modules for the requirement, but if the MOD gave them the future road map how the army is looking forward to then, the company could invest in the R&D keeping the future requirement in mind. The same module could be used in the Radar for the IA, IAF, surveillance, civil, naval, police, applications. Also time have come when all the three branches of the armed forces, need to be regulated, and looked at the Unified combined forces, and the QA, testing should be acceptable to all of them, instead of conducting the whole sets of test again.
     
  2. Picdelamirand-oil

    Picdelamirand-oil Lt. Colonel MILITARY STRATEGIST

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    Bad for Dassault!
    Good for Dassault, SP is hard to apply....
     
  3. Agent_47

    Agent_47 Admin - Blog IDF NewBie

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    The Trouble with Chapter 7


    Nationalisation clause’ for strategic partnerships troubles defence companies more than minority stake requirement

    The policy for Strategic Partnerships in defence, published last week, was generally being read as a welcome move by defence companies, until they read the fine print and came across a clause which has left them scratching their heads.

    While this ‘nationalization clause’ does not directly apply to foreign Original Equipment Manufacturers (OEMs), it will be binding on them and has left them wondering if they can ultimately offer technologies for partnerships with Indian companies for the projects listed in Chapter 7 of the Defence Procurement Procedure (DPP) 2016.

    The list of these projects consists of fighter aircraft, submarines, helicopters and armoured vehicles, for which defence companies were finally happy to see some kind of roadmap out of the gridlock caused by the absence of this policy.

    Minority Stake
    But representatives of foreign OEMs, after studying the document, now think that it will be impossible for them to bring their ‘best and biggest’ to the table.

    One executive said that while they could live with the restriction on their stake to 49 percent in any such partnership, ‘naturally’ this restraint wouldn’t help to persuade them to offer their most modern technologies for these projects.

    But more than the stake restriction, the ‘nationalization clause’ nestled away in an appendix to Chapter 7 is being expected to ensure that foreign OEMs will only offer ‘end of life technologies’ for the four segments, if at all.

    ‘Nationalisation Clause
    Chapter 7 lists the requirements of potential Indian companies to qualify as Strategic Partners under Appendix A.

    The first paragraph of Appendix A says, among other things:

    In certain extreme circumstances of conflict like war, the GoI would have the right to acquire control over the intellectual property used and facilities developed pursuant to the Strategic Partnership.

    Although Appendix A is supposed to list the Ownership Structure requirements of Indian companies applying to become strategic partners, this requirement would apply just as much to any foreign OEM whom they might partner.

    And even though the likelihood of the circumstances described above might be low, lawyers for foreign OEMs and governments will have to determine whether they can accept this condition as given for the technologies being offered.

    Industry Reaction
    StratPost elicited responses from the leadership of some of the world’s top foreign OEMs active in the defence and aerospace industry in India and although none of them would comment on the record, here’s what they said about what is now being called the ‘nationalisation clause’.

    “I hadn’t seen that before, but having read it now, I can see that’s a problem. Question is: did the GoI insist on similar conditions in earlier license production programs?,” asked one senior executive.

    “I’ve never seen this before. Why is it always a step forwards, then backwards? What I think they’re trying to say is that India will not permit supplier countries to terminate supplies in the event of a war. Fair enough, but when you start talking about acquiring the intellectual property etc, I’d imagine it gets a lot of people nervous. Further, what does ‘pursuant’ mean? Isn’t the point to also encourage design work in India which would require investment?” he asked.

    Another executive, the head of a global defence company’s India operations, clarified, “We have not see that clause anywhere else.”

    “We now have to work on the assumption that the IP is lost. That, along with less that 50 percent control – so we can now only offer only those technologies that have no economic life left in them. Basically, end of life technologies,” he explained.

    Referring to the ‘the ingenuity of the MoD babus’, he said, “I underestimated the bureaucracy’s ability to torpedo any framework. Some are saying that this is a Trojan horse approach for government to nationalise SP (strategic partnerships) and convert them to a DPSU.”

    A third senior executive, who’s company is trying to make a first foray into India and trying to sell over a billion dollars worth of defence and aerospace equipment, said, “IP issue is a sensitive topic for foreign OEMs. After all a lot of money goes into developing IP and the developer would seek protection.”

    A fourth senior industry executive explained that what this could do is either prevent foreign OEMs from participating altogether, because of their own laws or the sensitivity of the intellectual property, or prevent them from offering any technology still has economic value.

    “Are they trying to sabotage their own process? Any IPR in a strategic partnership will inevitably be brought to the table only by the foreign OEM,” he pointed out

    An international industry and trade body representative said, “It’s effectively a non-starter, and begs the question as to whether industry input is considered in a worthwhile manner. To seize, on arbitrary or ill defined grounds, intellectual property as part of a strategic partnership model, is to effectively have the intent to fully transfer all technology at the outset and formation of the partnership.”

    http://www.stratpost.com/trouble-chapter-7/
     
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  4. Agent_47

    Agent_47 Admin - Blog IDF NewBie

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    s1_052517070534.jpg
     
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  5. Sancho

    Sancho Lt. Colonel Technical Analyst

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  6. Sancho

    Sancho Lt. Colonel Technical Analyst

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    http://m.economictimes.com/news/def...act-with-defence/amp_articleshow/57645018.cms

    So neither the industry, nor parts of the government are convinced about the policy. Let's see if the PM pushes it through on his own again.
     
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  7. Abingdonboy

    Abingdonboy Major Technical Analyst

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    As I've been saying, the SPM is a LONG way away from implementation despite being cleared by the DAC.

    This is really going to screw up some major procurements specifically the NMRH ( AGAIN :angry:).


    And the logic of having the Finance Minister at the helm of the MoD during such a time when key reforms in defence procurement are being undertaken is so ludicrious it makes my head hurt.

    There is an entrenched babudom that will seek to disrupt ANY change to the status quo and right now it is these babus that are running the MoD with Jaitley's attention, rightly, being on his main portfolio (Finance).

    And has anyone noticed that since Q3 2016, big ticket defence deals have almost grinded to a halt? We are now in another cancellation/re-tender cycle but there are still plenty of pending deals that the CCS hasn't cleared.

    The more things change, the more they stay the same.....

    @Hellfire @Agent_47 @PARIKRAMA @Gessler @vstol jockey @GuardianRED @Grevion @bharathp @Blackjay @Sancho @randomradio @SrNair @nair @zebra7
     
    Last edited: Aug 12, 2017
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  8. bharathp

    bharathp Developers Guild Developers -IT and R&D

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    the BJP has a LOT of fish to fry atm. including the RS majority, 2019 elections, getting economy back on track, fighting the likes of ndtv and such. hav you noticed kejri is almost out of wind? but he will come back when it hurts the most. I believe there is some big ticket item going on secretly. the HAL/DRDO folks have shut their mouths (else we used to listed about stuff from them every 15 days or so).. getting a regular defence minster is important.. I am hoping a shrewd politician would take that job instead of a glib arun jaitley.
     
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  9. Agent_47

    Agent_47 Admin - Blog IDF NewBie

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    NMRH is not even initiated compared to P75I. May be its not a priority ! No point mentioning it. :drag:
     
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  10. Abingdonboy

    Abingdonboy Major Technical Analyst

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    150++ helos to replace 40+ year old junk isn't a priority? If that's the case I despair, the IN totally seems to have lost its mind lately- going ahead with the LHD/LPD deal without making any progress on their vertical lift procurements is just mind numbingly stupid.
     
  11. randomradio

    randomradio Colonel Technical Analyst

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    Calm down bro. The helicopters can wait.

    Our Kamovs will be upgraded.
    http://indiatoday.intoday.in/story/...arine-hunting-kamov-28-choppers/1/727853.html

    We may be buying 4 more Canadian Sea Kings while upgrading our Sea Kings.

    And the IN will have 2 heli MII programs, 100+ light helicopters and 120+ medium helicopters. They will have the MRCBF program as well as new batches of trainer aircraft. Their UAV programs are well underway with the Guardian for now followed by Triton a few years later. They will even be inducting the LCH.

    When it comes to aircraft, only IAF is in a critical condition.
     
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  12. Sancho

    Sancho Lt. Colonel Technical Analyst

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    Of course it is, because it's a new policy and sadly not really well thought through yet. But that doesn't take away the fact, that the PMO gives priority to that policy, over the buy and make Indian policy. The news today even says, that the torpedo procurement for Scorpene subs, will be done under SPM, although I think that's false reporting.
     
  13. Agent_47

    Agent_47 Admin - Blog IDF NewBie

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    Navy leads the way on Strategic Partnerships

    When Chapter 07 of the Defence Procurement Procedure of 2016 (DPP 2016) was finally published on May 31, 2017 after much delay, it evoked a fair bit of head-scratching from industry, who were still unsure about how the process would pan out. “Let’s see how the fighter thing goes,” commented most industry executives, referring to the Indian Air Force (IAF) acquisition process and one of the four Make in India programs under Chapter 07, which was widely expected to be the first of the four programs to hear the starting pistol.

    Instead, the Indian Navy, which has ownership of two of the four Chapter 07 projects, surprised many by issuing Requests For Information (RFIs) for both, submarines and the helicopter acquisition programs, in quick succession, shortly after the publication of Chapter 07.

    One of the major concerns of industry was how the requirements of Strategic Partnerships under Chapter 07 would be incorporated into the traditional tender process under DPP 2016. Analysis of Chapter 07 reveals many instances where processes have been left vague, apparently deliberately, to allow for subsequent customization and refinement. At any rate, the impression left by the publication of Chapter 07 was that competition under it would still be an ‘L1 game’ – that ultimately the technically qualified cheapest bid would win, irrespective of offers for transfer of technology and associated requirements.

    But the navy appears to have dispelled this impression and settled many of these concerns with its two RFIs. Although the RFI for submarines is not a public document, the RFIs for Naval Utility Helicopters and Naval Multi Role Helicopters are freely available.

    Now, the tender process under Chapter 07 is significantly different from the standard process under DPP 2016 and requires separate processes for the shortlisting of foreign OEMs, Indian applicant companies and, finally, the joint bid to an RFP.

    The RFIs issued by the navy are the first step in the process of shortlisting foreign OEMs who will later be allowed to partner with Indian companies and bid for the subsequent RFPs for submarines and the two helicopter types.

    Under Chapter 07, the process leading up to this shortlist requires foreign OEMs to submit information about their intended proposals for transfer of technology, (specifically range, depth and scope), percentage and value of indigenous content, creation of manufacturing infrastructure and eco-system, train manpower and roadmap for research and development.

    The value and extent of these heads have been traditionally difficult to quantify. In it’s RFIs, the navy has diligently addressed all of these and , for instance, deliberately conveyed the the required range, depth and scope for transfer of technology under specific heads, which will leave little room for foreign OEMs to later weasel out of their obligations and set a quantifiable, comparable, compliance-based high bar for foreign OEMs, which will be their first entry barrier to finding a place in the first shortlist, after the submission of the associated Expression of Interest.

    This is, perhaps, a result of lessons learned by the navy from observing the IAF experience with their ill-fated tender for 126 Medium Multi Role Combat Aircraft (MMRCA).

    Further, with the navy setting the standard for stated requirements for transfer of technology, the IAF and the army will find it difficult to ignore this precedent when they issue RFIs for fighter aircraft and armoured vehicles, respectively, under Chapter 07.

    As things stand, the navy has fulfilled its responsibility to begin the the Make in India acquisition process for two of the the four programs under Chapter 07 and issued three RFIs.

    Replies to an earlier navy RFI for Multi Role Carrier Borne Fighter (MRCBF) aircraft, which predates the publication of Chapter 07, have already been submitted. The RFI for this is widely expected to be brought under Chapter 07, as well, with all the associated requirements for Make in India, the model for which has been created in the two RFIs issued by the navy.

    It is now up to the IAF and the army to follow suit and match the standards set by the navy.

    https://www.stratpost.com/navy-leads-way-strategic-partnerships/
     
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  14. Agent_47

    Agent_47 Admin - Blog IDF NewBie

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    An addition which will simplify future procurement process and give incentive to selected companies to invest in R&D .


    FICV is not under SP but in ‘Make’ category of acquisition in chapter 3 of DPP 2016.

    SE program is yet to issue a formal RFI under SP. What reported before was an informal EoI.

    http://www.defensenews.com/air/2017...e-road-map-for-single-engine-fighter-program/
     
  15. Sancho

    Sancho Lt. Colonel Technical Analyst

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    The EOI would be issued after the RFI, which means the tender is well beyond the RFI stage. But as I said in my reply to pic, I wouldn't rule out another RFI now that the SPM is official, for bureaucratic reasons, just not based on that article, that has several inconsistencies.
     

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