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Defence Acquisition Procedure 2020

  • 29 Sep 2020
  • 7 min read

Why in News

Recently, a new Defence Acquisition Procedure (DAP) (erstwhile Defence Procurement Procedure or DPP), 2020 was released by the Ministry of Defence (MoD).

Key Points

  • About: The DAP contains policies and procedures for procurement and acquisition from the capital budget of the MoD in order to modernise the Armed Forces including the Coast Guard.
  • Background: The first Defence Procurement Procedure (DPP) was promulgated in 2002.
  • Objective: Turning India into a global manufacturing hub.
  • Salient Features:
    • For Ease of Doing Business:
      • Time Bound Defence Procurement Process and Faster Decision Making: By setting up a Project Management Unit to support contract management and to streamline the Acquisition process.
      • Revised Offset Guidelines: Preference will be given to manufacture of complete defence products over components and various multipliers have been added to give incentivisation in discharge of offsets.
        • Further, there will be no offset clause in government-to-government, single vendor and Intergovernmental Agreements (IGA).
        • Offsets are a portion of a contracted price with a foreign supplier that must be re-invested in the Indian defence sector, or against which the government can purchase technology.
        • Multipliers are credit values earned on offset transactions. A multiplier of 3 means a foreign company can claim credits upto three times of its actual offset investment.
        • The offset policy for defence deals was adopted in 2005 for all defence capital imports above Rs. 300 crore under which the foreign vendor is required to invest at least 30% of the value of the contract in India.
        • Offset clause was hindering the transfer of technology, according to a recent CAG report.
      • Rationalization of Procedures for Trials and Testing: Scope of trials will be restricted to physical evaluation of core operational parameters.
    • To Develop India into Global Manufacturing Hub:
      • FDI in Defence Manufacturing: Provisions have been incorporated like a new category ‘Buy (Global – Manufacture in India)’, to encourage foreign companies to set up manufacturing through its subsidiary in India.
    • To promote Make in India and Atmanirbhar Bharat initiatives:
      • Reservation in Categories for Indian Vendors: Some categories like Buy (Indian Indigenously Designed Developed and Manufactured -IDDM), Production Agency in Design & Development etc. will be exclusively reserved for Indian Vendors and FDI of more than 49% is not allowed.
      • Ban on Import of Certain Items: With a view to promote domestic and indigenous industry, the MoD will notify a list of weapons/platforms banned for import.
      • Indigenisation of Imported Spares: Steps to promote manufacturing of parts in India have been taken. This includes establishment of co-production facilities through Intergovernmental Agreements (IGA) achieving ‘Import Substitution’ and reducing Life Cycle Cost.
      • Overall Enhancement in Indigenous Content (IC): This has been done in all the categories, for products like softwares etc, as follows:
    • Other Features
      • Cost Cutting : Leasing has been introduced as a new category for acquisition in addition to the existing ‘Buy’ and ‘Make’ categories so that periodical rental payments are made instead of huge capital investment.
      • This will be useful for military equipment not used in actual warfare like transport fleets, trainers, simulators, among others.
  • Other Related Initiatives:
    • Recently, the Ministry of Defence has formulated a Draft Defence Production and Export Promotion Policy 2020 (DPEPP 2020).
    • Innovations for Defence Excellence (iDEX) has been operationalised to provide necessary incubation and infrastructure support to the startups in the defence area.
      • iDEX would be further scaled up to engage with 300 more startups and develop 60 new technologies/products during the next five years.
    • Mission Raksha Gyan Shakti was launched to promote a greater culture of innovation and technology development and file a higher number of patents in Defence Public Sector Undertakings (DPSUs), Ordnance Factory Board (OFB).
      • It would be scaled up for promoting the creation of Intellectual Property in the sector and its commercial utilisation.

Way Forward

  • Self-reliance in defence manufacturing is a crucial component of effective defence capability and to maintain national sovereignty and achieve military superiority. The DAP 2020 not only protects the interests of domestic manufacturers by indigenization of technology, but also provides impetus to foreign investment in the country.
  • Given the key geostrategic challenges, emanating from the threat of two-front war (against China and Pakistan combinedly), India needs to carry out much-needed defence reforms. DAP 2020 is the one of the many needed defence reforms.

Source: TH

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