India’s defence procurement framework has undergone a major shift from import-led acquisition towards indigenous manufacturing, localisation and technology engagement. The Strategic Partnership Model (“SPM”), originally introduced under the Defence Procurement Procedure, 2016and subsequently incorporated into the Defence Acquisition Procedure, 2020 (“DAP 2020”), reflects the Government of India’s long-term policy objective of establishing domestic defence industry capable of manufacturing complex defence products in India with foreign collaboration.

Under the present framework, foreign original equipment manufacturers (“OEM(s)”) seeking participation in major defence procurement programmes are increasingly required to collaborate with Indian entities through long-term industrial arrangements involving licensed production, transfer of technology, localisation of supply chains and indigenous manufacturing commitments. The policy objective of the Indian government is no longer limited to procurement of defence equipment. Instead, the emphasis has shifted towards establishment of a domestic defence industrial sector with participation from private sector players, focussing on capability development and gradual technological self-reliance.

Policy Evolution of SPM

SPM was initially introduced pursuant to the approval of the Defence Acquisition Council in 2017and incorporated as Chapter VII of the Defence Procurement Procedure, 2016. The Ministry of Defence (“MoD”) clarified that the model was intended to institutionalise a transparent and objective mechanism to encourage participation of the Indian private sector in manufacturing defence products such as fighter aircraft, helicopters, submarines and armoured fighting vehicles.

DAP 2020 retained and strengthened this framework, and expressly recognised acquisitions under SPM as arrangements involving participation of private Indian firms together with foreign OEMs under the “Make in India” initiative. The said framework intends the Indian strategic partner to act as the system integrator while recognising development partners, specialised vendors and suppliers, particularly from micro, small and medium enterprises (MSME). SPM must therefore be viewed alongside broader policy measures introduced under DAP 2020, including prioritisation of procurement categories favouring indigenous content, introduction of the “Buy (Global – Manufacture in India)” category, increased emphasis on domestic manufacturing and localisation, rationalisation of offset obligations and encouragement for technology transfer and indigenous capability development.

These reforms collectively reflect a procurement philosophy where foreign participation is permissible but increasingly tied to local manufacturing commitments and industrial collaboration with Indian entities.

Structure of SPM

Under SPM, the MoD identifies specific defence segments eligible for acquisition, where Indian private sector entities are shortlisted as strategic partners based on financial, technical and infrastructure capability criteria. Foreign OEMs are separately evaluated on the basis of technological capability, willingness to transfer technology, manufacturing strength and ability to support indigenisation.

The model effectively creates a long-term tripartite industrial structure involving MoD as the procuring authority, the Indian strategic partner as the domestic system integrator and the foreign OEM as the technology and platform provider.

The selected Indian strategic partner is expected to establish manufacturing capability in India, integrate domestic suppliers and progressively enhance indigenous content. The foreign OEM, in turn, is expected to provide technology access, manufacturing support, training and technical collaboration. Unlike conventional procurement contracts involving direct imports, SPM seeks to establish long-term domestic manufacturing capability through industrial cooperation.

Mandatory Indian Partnership Structure

A central feature of SPM is that foreign OEMs do not participate independently in procurement programmes (falling within the SPM framework). Instead, participation is structured through partnership with an eligible Indian strategic partner. The framework under DAP 2020 lays continuous emphasis on the role of the Indian entity as the principal integrator and manufacturer. This approach aligns with India’s broader defence industrial policy, including the “Aatmanirbhar Bharat” initiative and localisation-focused procurement priorities.

The requirement for Indian participation also aligns with India’s foreign direct investment policy in the defence sector. While significant foreign investment is permitted in defence sector (upto 74% through automatic route and beyond 74% through government route on a case-by-case basis), procurement eligibility under indigenous procurement categories and strategic partnership structures continues to place significant emphasis on Indian ownership, control and domestic manufacturing capability.

Recent policy discussions surrounding the proposed Defence Acquisition Procedure, 2026framework further indicate that the Government intends to maintain a distinction between Indian vendors and Indian subsidiaries of foreign OEMs. The policy direction therefore continues to favour domestic industrial control and indigenous manufacturing capacity.

Requirement of Technology Transfer

Technology transfer occupies a critical position within SPM. The objective is not limited to assembly operations or licensed manufacturing. Instead, the framework seeks gradual transition to advanced manufacturing capability, integration know-how, maintenance capability and support infrastructure within India.

Under DAP 2020, foreign OEMs participating in strategic partnership procurements are evaluated on factors such as the extent of technology transfer, depth of indigenisation, manufacturing capability creation in India, lifecycle support commitments, support for domestic supply chains and long-term sustainment capability. The policy therefore incentivises foreign OEMs willing to share meaningful manufacturing and technical capability with Indian partners.

In practice, technology transfer arrangements under defence collaborations may include licensed manufacturing rights, transfer of technical documentation, manufacturing process know-how, tooling and testing capability, integration capability, training and technical assistance, maintenance, repair and overhaul (MRO) capability and support for indigenous sourcing and localisation.

However, the scope and depth of transfer continue to remain commercially negotiated and subject to export control restrictions imposed by the foreign OEM’s home jurisdiction.

License Production and Local Manufacturing

Licensed production arrangements remain one of the most common legal and commercial structures applicable under Indian defence collaborations. Under such arrangements, the foreign OEM authorises the Indian strategic partner to manufacture equipment or subsystems in India pursuant to technology licensing agreements and manufacturing assistance arrangements.

DAP 2020 encourages domestic manufacturing through multiple acquisition categories, including Buy (Indian – IDDM), Buy (Indian), Buy and Make (Indian), Buy (Global – Manufacture in India) and SPM procurements, which conditions acquisitions on local manufacturing vendors. Accordingly, foreign OEMs mandatorily require local manufacturing capability if they intend to remain competitive in Indian defence procurement markets. The “Buy (Global – Manufacture in India)” category is particularly significant because it allows foreign vendors to establish manufacturing arrangements in India through subsidiaries or joint ventures while complying with indigenous manufacturing requirements.

At the same time, strategic partnership procurements continue to favour collaboration with Indian system integrators capable of achieving progressive localisation.

Given the long operational lifecycle of defence products, contractual arrangements typically extend beyond immediate manufacturing obligations and include long-term maintenance, upgrades, servicing and sustainment support.

Shift from Pure Imports to Industrial Collaboration

The overall trajectory of Indian defence procurement policy highlights a gradual movement away from direct imports towards domestic capability creation. SPM reflects this transition most clearly. Foreign OEMs are no longer evaluated solely on capability or pricing. Increasingly, evaluation also depends on willingness to manufacture in India, localisation commitments, technology transfer depth, support for indigenous ecosystems, long-term industrial investment and partnership capability with Indian industry.

Consequently, foreign OEMs seeking long-term access to the Indian defence market must increasingly adopt collaborative industrial structures rather than transactional export-led models.

Conclusion

SPM represents one of the most significant structural reforms in India’s defence procurement system. It indicates the intent of the Indian government to transform India from a defence importer into a manufacturing and technology development hub.

Under DAP 2020, foreign OEM participation in major defence programmes is linked with domestic industrial collaboration, technology transfer and localisation commitments. The framework encourages long-term partnerships between foreign technology providers and Indian strategic partners, with the latter expected to emerge as system integrators capable of supporting indigenous manufacturing requirements.

For foreign OEMs, market access in India therefore increasingly depends on their ability to partner effectively with Indian industry, structure commercially viable technology transfer arrangements and support progressive indigenisation. For Indian industry, SPM creates an opportunity to participate in high-value defence manufacturing programmes, engage advanced technologies and develop long-term domestic industrial capability.

As India continues to recalibrate its defence acquisition priorities towards self-reliance and indigenous manufacturing, SPM is likely to remain central to the future evolution of India’s defence procurement framework.

Authors:

Mr. Uday Singh Ahlawat – Managing partner

Ms. Ishita Goel – Associate

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