>also suggested that India and Japan jointly design frigates to be built (probably in India) used by the Indian Navy and the Japanese Maritime Self-Defence

A Geneva-Based Secret Ruler of Pakistan Controls India’s Banking Roots : The unpaid Serena Hotel bill wasn’t just Pakistan’s humiliation — it was India’s wake-up call. One Geneva-based network owns Pakistan’s largest bank, bails out its government, hosts nuclear diplomacy… and holds promoter status with board access in an Indian scheduled commercial bank after 41 years of deep penetration into rural India.

By Maj-Gen Rambir Singh Mann

“Not everyone can build everything. At most, three Indian companies can manufacture artillery. You cannot sustain five submarine builders — two at most. Aircraft makers, two as well.”

That remark came from a senior figure in the defence industry in April 2024. “The government must now decide who India’s defence manufacturers will be,” the industrialist continued, outlining what would amount to a fundamental change in mindset in how it approaches defence procurement. “It should place long-term orders with the companies it believes can endure in this sector.”

At the time, his company was still awaiting a major order from the government, which came nearly a year later. However, the government’s larger decision on identifying defence manufacturers, the so-called ‘national champions’, has still not materialised. 

“Identifying national champions in defence and sustaining them through long-term orders is the model followed around the world. South Korea is a clear example. In the United States (US), defence giants — from Lockheed Martin and Boeing in aerospace to Huntington Ingalls in military shipbuilding — operate within a similar framework, and the results speak for themselves,” said an industry executive, who requested anonymity. 

“Such a policy shift would mark a paradigm change in Indian defence manufacturing. It would, however, require a change in mindset — the recognition that defence procurement is about identifying and acquiring capabilities, not merely securing the lowest price,” said another sector executive, who also requested anonymity. 

He noted that, under current conditions, companies move from one tender to the next, competing afresh for each programme. “This leaves little time or incentive for sustained research and development (R&D), or for building the necessary sinews — from a supplier base to manufacturing infrastructure — in a sector with a single buyer, the armed forces, and long gestation periods for product development and contract finalisation.”

Industry insiders, interviewed on background, defined a prospective ‘champion’ as an Indian company identified and engaged by the government to become a globally competitive manufacturer in a strategically important sector. Rather than a purely market- or competition-driven system, in which many companies compete for contracts, the model under discussion would rely on preferential, sustained, and policy-driven state support. 

In practice, that would mean awarding large, long-term orders to a smaller group of producers, alongside policy backing such as R&D funding, as well as credit and diplomatic support for exports. The aim would be to give these firms the scale and stability needed to invest in technology, manage complex programmes, and compete globally.

But is this merely wishful thinking within the industry — particularly among the larger industrial houses that have entered defence manufacturing since the sector’s formal liberalisation in May 2001 — or is it actually on the government’s agenda? 

There have been hints in past policy signals. For now, though, the clearest place to look for an answer may be a recent government document: the draft Defence Acquisition Procedure (DAP) 2026, released in February, which will govern the procurement of equipment, platforms and systems under the capital head of expenditure. Once approved, it will replace the DAP 2020 currently in force.

The old model

“The Defence Procurement Procedure (DPP) 2006 included a provision to promote private-sector participation by identifying ‘industry leaders’, termed ‘Raksha Udyog Ratnas or Defence Industry Champions’, with the intent of treating them on par with defence public sector undertakings (DPSUs),” said Amit Cowshish, former financial adviser (acquisition) to the Ministry of Defence (MoD). 

By mid-2007, a high-level government committee had shortlisted 13 firms, including Larsen & Toubro (L&T) and Ashok Leyland, for notification as Raksha Udyog Ratnas, subject to approval by the Defence Acquisition Council headed by the defence minister. However, according to another former MoD official, strong opposition from unions at the DPSUs and the erstwhile ordnance factories stalled the process. “After some progress, the plan was eventually mothballed,” said Cowshish, adding, “At present, national champions is no longer an explicit policy position.” 

One of the executives cited earlier, however, said that with the corporatisation of the ordnance factories and significant reforms in the environment since then, now may be an appropriate time to revisit the concept.

Cowshish and the executive said that in the current scheme of things, a Strategic Partnership (SP) model is the only part of the draft DAP 2026 — like the earlier policy it seeks to replace — that offers a path to a national champions framework, albeit without explicitly using the term. 

The SP model — introduced in May 2017 as Chapter VII of the DPP 2016 — followed a December 2015 report by a task force chaired by V K Aatre, a former scientific adviser to the defence minister. The report set out the criteria for selecting strategic partners from the private sector to carry out high-value defence projects.

The preamble to the SP chapter noted that the production of military aircraft, submarines, helicopters, and armoured vehicles remained concentrated in the public sector, which continued to hold a “commanding role” because of legacy government support, including long-term procurement arrangements. It concluded: “There is thus a need to institutionalise a transparent, objective and functional mechanism to encourage broader participation of the private sector, in addition to capacities of DPSUs, in manufacturing of major defence platforms.”

“The SP model is yet to deliver on its promise,” said the former official cited above. In essence, as the draft DAP 2026 reiterates from earlier policies, the Indian SP is envisioned as a systems integrator — capable of assembling subsystems into an operational defence platform — with the ability to build a supplier network for sourcing components.

Under the model, strategic partners were to be selected for four segments: fighter aircraft, helicopters, submarines, and armoured fighting vehicles and main battle tanks. The latest draft document adds a fifth category: “Niche technology systems with strategic implication.” Typically, only one partner would be chosen for each segment. Once selected, the company would tie up with a foreign manufacturer. The MoD would also prepare a list of eligible foreign manufacturers based on factors such as service requirements, the potential for technology transfer, and the scope for indigenisation. 

Yet the two major programmes under the model ultimately went to DPSUs. The first is Project 75 India (P75I), under which state-run Mazagon Dock Shipbuilders Ltd (MDL) will construct six advanced conventional submarines with technology transfer from its partner, the German firm ThyssenKrupp Marine Systems. Their bid remained the only one in contention after L&T’s proposal with the Spanish shipbuilder Navantia was declared non-compliant. The P75I contract — estimated to cost ₹80,000-₹90,000 crore — is expected to be signed in the first half of the financial year 2026–27.

Cowshish noted that MDL was allowed to participate in the programme despite the stated objective of the SP model. While this was within the MoD’s prerogative — and the model does provide for DPSU participation — he said the provision should have been invoked only in exceptional cases, failing which the spirit of the model would be undermined. 

The second project processed under the SP model involved the procurement of 111 Naval Utility Helicopters, which received initial approval in November 2018. Hindustan Aeronautics Ltd (HAL) later sought to compete for the ₹21,000 crore programme, a move opposed by the four private contenders — Bharat Forge, Tata Advanced Systems Ltd (TASL), Mahindra Defence Systems Ltd, and Adani Defence & Aerospace. The project was subsequently rechristened Utility Helicopter Marine, and as of May 2025, it was being handled by HAL, with design and development activities underway.

One of the private-sector executives cited earlier contended that opposition from DPSUs ensured the model never achieved its intended goals. Cowshish, however, pointed to a different factor as the model’s real stumbling block: the provision that the Indian firms that would serve as the “strategic partners” were to be chosen by the government.

One of the executives cited earlier agreed that placing the responsibility for selection with the government could invite complications, including potential disputes by rival firms. 

“The selection of SPs by the government entails a complex process. It would have to be conducted with such transparency that its legitimacy cannot be questioned. It remains to be seen if the institutional capacity to do so exists or can be built up,” Cowshish explained.

A way forward

Such a strengthening of capacity within the MoD could well determine the success of the SP model, which envisages a selection criteria that “should be fair, reasonable, non-arbitrary, transparent and rational…”. 

One of the industry insiders cited earlier emphasised that the first step must therefore be a transparent and clearly defined process for identifying candidate firms that already possess significant manufacturing capacity, financial strength, and a proven ability to deliver major projects. “This will require capacity-building within the MoD, particularly by ensuring the presence of a specialised defence bureaucracy across its key functions,” he added.

India does have elements of a specialised defence bureaucracy, particularly in areas such as auditing and accounting through the Indian Defence Accounts Service. That said, it is instructive to look at global arrangements, where defence acquisitions are managed in the US by the Office of the Secretary of War (earlier the Office of the Secretary of Defense), in France by the Direction Générale de l’Armement, and in China by the Equipment Development Department alongside the State Administration of Science, Technology and Industry for National Defense.

“The defence secretary, the secretary defence production, and the director general (DG) acquisition serve relatively short tenures,” said a consultant who has worked with the MoD in the past and also wished to remain unnamed. By contrast, for example, the current American undersecretary of war responsible for acquisition, contract administration, acquisition workforce, and the defence industrial base, has served in senior roles within the Department of War for at least two decades. 

A third former MoD official, however, contended that this was not a major stumbling block, noting that the post of DG acquisition is held by an additional secretary-level officer. “This is not very different from the US having an undersecretary for the same function. Moreover, the delays in procurement do not stem from this structure,” he added. 

To address the longstanding issue of slow procurement, even a separate acquisition agency has been mooted in the past. A committee constituted by the MoD in April 2016 under the chairmanship of management expert Pritam Singh recommended, in its report submitted in February 2017, the creation of a “central, autonomous, empowered professional” defence procurement organisation.

“The committee recommended creating a professional cadre for defence acquisition over time. But it never went anywhere,” said Cowshish, who was a member.

While the third MoD official cited earlier argued that calls for a separate acquisition agency do not reflect ground realities, the issue is now moot, with no such body currently under consideration.

For his part, Cowshish suggested avoiding the question of selecting a strategic partner altogether. He cited the C295 programme, under which India’s first private-sector military aircraft manufacturing facility was inaugurated in Vadodara, Gujarat, in October 2024. The final assembly line, established by TASL in partnership with Airbus Spain, is producing the transport aircraft for the Indian Air Force. He noted that the MoD did not designate an Indian production agency for the programme. “The Airbus-Tata partnership went ahead without MoD intervention. Compared to the SP model, this approach stands a better chance of succeeding under Indian conditions,” he said. 

The draft DAP 2026, however, offers no indication that the government will relinquish its role in selecting the SP.

A comparison of the SP section across DPP 2016, DAP 2020, and the draft DAP 2026 shows that the model has remained stable across policy iterations. Moreover, one specific and crucial section — “Organisational Structure at MoD” — appears in all three documents, again essentially unchanged in its stated goal, with the addition of some procedural details. For the “effective implementation” of the SP model, the section calls for setting up within the MoD an “appropriate institutional and administrative mechanism”, with “adequate expertise in relevant fields like procurement, contract law and ToT (transfer of technology) arrangements”.

A MoD source familiar with the matter said that strengthening institutional expertise is envisaged, and that timelines will be formulated once DAP 2026 is cleared and comes into force.

The private sector’s hopes for a national champions policy — albeit in a truncated form and without explicit use of the term — now rest on the success of this MoD initiative, and by extension, the SP model.

Changes for the better

Elsewhere, the draft DAP 2026 does, in fact, propose changes that could benefit the industry.

“Compared to DAP 2020, the draft 2026 policy proposes to reduce the main procurement categories from five to four by removing the ‘Buy (Indian)’ category, which deals with the acquisition of equipment from an Indian vendor that may not have been designed or developed indigenously,” said Commander Gautam Nanda (retired), Partner (Business Consulting) at EY. This will reduce complexity and some of the overlap across categories, he added.

Another long-standing industry demand — the shortening of procurement timelines — has also been addressed in some categories. “In two of the three acquisition categories under the ‘development scheme’ route, which covers equipment requiring design and development by indigenous design agencies or industry, the time from approval in principle to issue of project sanction order has been reduced by 16 per cent and over 24 per cent,” said Arun T. Ramchandani, senior vice-president (Precision Engineering & Systems) at L&T. The draft further introduces a formal definition of what would constitute indigenous design (ID), and makes provision for 15 per cent credit to be accorded for meeting ID requirements when determining the lowest bidder in the ‘Buy Global and Manufacture in India’ category. 

There is also provision for awarding credit for ownership of the design of critical technology elements in platforms and systems. Ramchandani welcomed the move, noting that it would advantage the Indian industry.

In 2024–2025, the private sector accounted for over 64 per cent of defence exports, at more than ₹15,000 crore, but just 22 per cent of domestic defence manufacturing, at ₹34,000 crore. Between 2016–2017 and 2024–2025, its output more than doubled from over ₹14,000 crore, even as its share rose only marginally from 19 per cent at the start. 

However, private players can remain cautiously optimistic, as the government appears to envisage a larger role for them. 

For the first time, the draft DAP 2026 proposes to institutionalise “civil-military fusion” — the integration of civilian and military sectors to share capabilities and innovation. This ambition is articulated alongside the government’s stated aim of building a “dual production pipeline” for defence capabilities, including collaboration between private companies and DPSUs.

In a broader assessment, one of the industry insiders cited earlier saw the draft as another step in the right direction. 

“It brings incremental improvement. But if you trace the trajectory from the formal liberalisation of the sector in 2001, it’s only been upwards, and that trend is likely to continue.”