Q. Why is this in news?
A. Recently, a new Defence Acquisition Procedure (DAP) (erstwhile Defence Procurement Procedure or DPP), 2020 was released by the Ministry of Defence (MoD).
Q. What is this ?
A. 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.
Q. Is there earlier procurement procedure ?
A. Yes, The first Defence Procurement Procedure (DPP) was promulgated in 2002.
A committee under the chairmanship of Director General (Acquisition) was constituted to review the Defence Procurement Procedure (DPP) 2016.
DPP 2016 was released replacing the DPP 2013 based on the recommendations of Dhirendra Singh committee.
It focussed on indigenously designed, developed and manufactured weapon systems.
It was facing several issues like lack of transparency (leading to Rafale Scam), inconvenient offset regulations etc.
Q. What is its objective?
- Turning India into a global manufacturing hub.
- Aligned with the vision of the Government of Atmanirbhar Bharat and empowering Indian domestic industry through Make in India initiative.
Q. What are its 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).
- 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 software’s etc, as follows:
- 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.
Q. What is offset clause?
- 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 up to 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.