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The lowest bid is one key selection criteria that worries some of the competitors.
“We’d like to see the Indian government work with the US government to ensure that these acquisition policies don’t disadvantage US companies just because we can’t get the lowest price,” Cara Abercrombie, former US deputy assistant secretary of defence for southeast Asia, told a recent panel in New York.
Under the strategic partnership policy, India will line up domestic companies that foreign players have to choose from to set up local plants.
For the Indian companies, which would hold the majority stake, it is a big win, says Dhiraj Mathur, an aerospace and defence specialist for the PwC consultancy.
“You know nothing about defence manufacturing and you’re going to partner with a global leader to make highly sophisticated equipment and the only reason they’re talking to you is because the government has told them to,” he said.
The Indian government wants to bring the local companies up to global standards to compete for the next round of orders.
China also built up local defence equipment manufacturing by forcing international firms to link up with Chinese companies and to hand over technology.
In India’s case, the foreign players are still pushing for ownership.
“Let us take a lead, let us be the majority,” said Ashish Saraf, vice president for industrial development at Airbus.
“Or let the Indian guys assume full liability (as per the policy). Assuming liabilities on an aircraft is not easy…. If a product fails, we are talking about hundreds of millions.”
His suggestion is a middle road where foreign companies can hold the majority stake, which can be pared back over time as the Indian partner gains in knowledge and experience.
“It takes years to transfer (technology) and to get proven products. These are complex products that need to perform in battles,” said Saraf.
The other hurdle in the policy is that transferring defence technology requires government approval.
In a strategy similar to one followed by the United States, India puts the onus on the foreign partners to get the green light from their respective governments, a challenging task for them.
“But if you want indigenisation, this is the only way you’ll get it,” said PwC’s Mathur.
