Strategic Partnership Model

The Strategic Partnership (SP) Model is a specialised acquisition pathway under DAP 2020 that designates a single Indian private sector company as the Strategic Partner for large-scale defence platform programmes, partnering with a foreign OEM to establish a complete manufacturing ecosystem in India.

What is the Strategic Partnership Model?

The SP Model was introduced to create Indian private sector entities capable of designing, manufacturing, and sustaining complete major defence platforms, submarines, helicopters, fighter aircraft, armoured vehicles, in India over the long term. It goes beyond individual contract delivery to build an enduring industrial capability.

The process works as follows:

1. The government identifies platform categories suited for the SP Model (currently submarines, single-engine fighter aircraft, helicopters, and armoured fighting vehicles)
2. Qualified Indian companies are evaluated and shortlisted as potential Strategic Partners based on financial strength, manufacturing infrastructure, and commitment
3. Each shortlisted SP negotiates separately with eligible foreign OEMs to identify a preferred technology partner
4. The government then awards the contract to the SP-OEM combination offering the best value, technology depth, and indigenous content roadmap
5. The SP is responsible for the entire programme, design integration, manufacturing, testing, and lifecycle support

The SP is expected to develop into a Tier-1 global defence manufacturer over the programme lifetime. Each SP programme is typically worth tens of thousands of crores and spans 20-30 years including lifecycle support.

Why the SP Model matters for Indian government suppliers

For large Indian industrial houses, both existing Defence PSUs and major private conglomerates, SP status is the highest tier of defence business, creating a captive production programme worth lakh crore-level revenues over decades. For tier-2 Indian vendors (component manufacturers, sub-system integrators, MRO providers), SP programmes create massive domestic supply chain demand as the SP is obligated to maximise indigenous content progressively. Even MSMEs can target specific component categories in the SP's supply chain.

Example

Under the SP Model for submarines, an Indian private sector conglomerate is selected as the Strategic Partner for 6 advanced conventional submarines worth approximately INR 43,000 crore. The SP partners with a European OEM for technology transfer and manufactures the submarines at a newly established shipyard. The programme creates a supply chain of over 200 Indian component manufacturers and commits to 60% indigenous content, rising to 80% for the second batch of submarines contracted under a follow-on option.

Frequently Asked Questions

How many Strategic Partners are selected per platform category?

Typically one Strategic Partner is selected per platform category programme to give the SP the programme volume needed to justify the massive upfront investment in infrastructure and capability building. Multiple SP programmes can exist across different platform categories simultaneously.

Do Defence PSUs participate in the SP Model?

The SP Model was specifically designed to bring private sector companies into large platform manufacturing. Defence PSUs (HAL, MDL, BDL, etc.) handle similar programmes through their own existing frameworks. However, a Defence PSU may be a sub-vendor in an SP's supply chain.

What is the difference between SP Model and Buy and Make (Indian)?

Buy and Make (Indian) is a contractual arrangement for a single production programme. The SP Model is a strategic industrial policy initiative that designates a company for long-term platform manufacturing capability building, often including multiple successive contracts, lifecycle support, and export potential. The SP relationship is ongoing, not transactional.

Can foreign companies hold equity in a Strategic Partner?

FDI in the SP entity is subject to defence FDI norms. Up to 100% FDI is permitted in the defence manufacturing sector via the automatic route up to 49% and via government approval beyond 49%. However, the SP must be an Indian-controlled entity and the majority equity holder must be Indian.