defence-procurement-draft-released

The Defence Minister unveiled the draft Defence Procurement Procedure (DPP) 2020 that aims at further increasing indigenous manufacturing and reducing timelines for procurement of defence equipment.

  • The Draft is finalized by a high-level committee headed by DG Acquisition, Ministry of Defence that was set up in 2019.

The major changes proposed in the new DPP 

  • Indigenous Content ratio hiked
    • The Draft proposes increasing the Indigenous Content (IC) stipulated in various categories of procurement by about 10% to support the ‘Make in India’ initiative. 
    • A simple and realistic methodology has been incorporated for verification of indigenous content for the first time.
  •  Use of raw materials, special alloys and software incentivised as use of indigenous raw material is a very important aspect of ‘Make in India’ and Indian Companies are world leaders in software.
  • Assurance of procurement on a single vendor basis from Aero Engine manufacturing unit and chips from FAB manufacturing units established in the country. 
  • New Category Buy (Global – Manufacture in India): 
    • Has been introduced with a minimum 50% indigenous content on cost basis of total contract value. 
    • Only the minimum necessary will be bought from abroad while the balance quantities will be manufactured in India. 
    • This would be in preference to the ‘Buy Global’ category as manufacturing will happen in India and jobs will be created in the country.
  • Leasing introduced as a new category
    • Leasing has been introduced as a new category for acquisition in addition to existing ‘Buy’ & ‘Make’ categories to substitute huge initial capital outlays with periodical rental payments. 
    • Leasing is permitted under two categories i.e, 
      • Lease (Indian) where Lessor is an Indian entity and is the owner of the assets and 
      • Lease (Global) where Lessor is a Global entity. This will be useful for military equipment not used in actual warfare like transport fleets, trainers, simulators, etc.
  • A new Chapter for procurement of software and systems: Is introduced for procurement of software and systems related projects as in such projects, obsolescence is very fast due to rapid changes in technology and flexibility in the procurement process is required to keep up with the technology.
  • A new Chapter is introduced for Post Contract Management: To facilitate and provide clear guidelines for issues arising during the contract period as typically Defence contracts last for a long period.
  • A comprehensive Chapter introduced for ‘Make’ to cover procurement from manufacturers in India including start-ups and innovators and from research projects of DRDO.
  • Timelines for procurement reduced: By reducing the process for accord of Acceptance of Necessity which would be a single stage of projects less than Rs.500 crore and in case of repeat orders. 
  • Field Evaluation Trials: To be conducted by specialised trial wings and the objective of trials will be to nurture competition rather than elimination for minor deficiencies.
  • Product support: The scope and options for Product Support have been widened to include contemporary concepts in vogue, namely 
    • Performance Based Logistics (PBL), 
    • Life Cycle Support Contract (LCSC), 
    • Comprehensive Maintenance Contract (CMC), etc to optimise life cycle support for equipment. 
    • The capital acquisition contract would normally also include support for five years beyond the warranty period.
  • Modified offset guidelines proposed to give emphasis on export of products rather than components.

Significance: 

  • Boost to Make in India: The aim is to make India self-reliant and a global manufacturing hub. 
  • Empower the private industry: The government is constantly striving to formulate policies to empower the private industry including MSMEs in order to develop the eco-system for indigenous defence production. 
  • Satisfy strategic needs: The defence industry of India is a strategically important sector having huge potential for growth. It needs to be the catalyst for India’s economic growth and realisation of our global ambitions.
  • Simplifying the procedures & reducing the overall procurement timelines: The draft is an attempt to take further steps to refine Life Cycle Support of procured equipment & platforms and hasten the defence acquisition process by further simplifying the procedures & reducing the overall procurement timelines.

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Image source: ORF