Policy

India opens draft defence procurement procedure 2020 for stake-holders inputs

Photo: India’s defence minister Rajnath Singh (extreme left) at a meeting to mark the release of the draft Defence Procurement Procedure 2020 for stake-holders’ inputs today.

New Delhi: India’s defence minister Rajnath Singh today threw open the draft Defence Procurement Procedure (DPP) 2020 that aims at further increasing indigenous manufacturing and reducing timelines for procurement of defence equipment for the public to receive inputs from the stake-holders.

The draft DPP, prepared by a high level committee headed by Director General Acquisition Apurva Chandra set up in August 2019, will now go through a round of vetting through stake-holders’ inputs till Apr. 17 before the final policy document is finalised and made applicable to all future defence procurement.

“Our aim is to make India self-reliant and a global manufacturing hub. The government is constantly striving to formulate policies to empower the private industry including MSMEs (Micro, Small and Medium Enterprises) in order to develop the eco-system for indigenous defence production. 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,” Rajnath Singh said on the occasion.

“With the experience gained by the industry and the Ministry of Defence (MoD), it is now time to take further steps to strengthen ‘Make in India‘ initiative, refine Life Cycle Support of procured equipment and platforms, and hasten the defence acquisition process by further simplifying the procedures and reducing the overall procurement timelines.”

The first DPP was promulgated in 2002 and has since been revised a number of times to provide impetus to the growing domestic industry and achieve enhanced self-reliance in defence manufacturing. The draft of DPP 2020 has been prepared by the ‘Review Committee’ based on the recommendations of all stakeholders, including the private industry.

In order to accrue advantage of domain specialisation of various subject matter experts, eight sub-committees headed by Lieutenant Generals of the Indian Army and their equivalent officers in the Indian Navy and the Indian Air Force were constituted to assist the review committee. These sub-committees carried out extensive deliberations and interactions over a period of six months to formulate their respective charters.

Here are some of the new measures that have been suggested in the draft document:

In view of the experience gained by the domestic industry, the draft DPP proposes increasing the Indigenous Content (IC) stipulated in various categories of procurement by about 10 per cent 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 have been 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 aeroengine manufacturing unit and chips from FAB manufacturing units that are established within the country.

A new procurement category called ‘Buy (Global – Manufacture in India)‘ has been introduced with minimum 50 per cent 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 has been introduced as a new category for acquisition in addition to existing ‘Buy‘ and ‘Make‘ categories to substitute huge initial capital outlays with periodical rental payments. Leasing is permitted under two categories, that is, ‘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, and simulators.

A new chapter has been 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 has been 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.

Timelines for procurement have been reduced by compressing the process for accord of ‘Acceptance of Necessity‘, which would be single stage for projects less than Rs 500 crore and in case of repeat orders. Trial methodology and ‘Quality Assurance Plan‘ are to be part of the Request for Proposals (RFP).

Field Evaluation Trials‘ are to be conducted by specialised trial wings and the objective of the trials will be to nurture competition rather than elimination for minor deficiencies.

A comprehensive chapter has been introduced for ‘Make’ to cover procurement from manufacturers in India including start-ups and innovators and from research projects of Defence Research and Development Organisation (DRDO).

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), and ‘Comprehensive Maintenance Contract‘ (CMC), 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 have been proposed to give emphasis on export of products rather than components. Higher multipliers have been proposed for procurement from MSMEs and units established in Defence Industrial Corridors. Higher multipliers have also been proposed for ‘Transfer of Technology‘ to private companies, Defence Public Dector Undertakings, Ordnance Factory Board and DRDO.

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