There is good news for indigenous defence industry, especially those involved in research and development. The new Defence Procurement Procedure (DPP) — approved by the Defence Acquisition Council (DAC) has introduced a new category for defence acquisition: Buy IDDM (Indigenously Designed, Developed and Manufactured). The Buy IDDM category will get the topmost priority amongst six categories that will constitute new DPP, which is the guiding document for all defence purchases in India.
In effect this means all those Indian companies who have the capability of designing and developing their products indigenously will from now on get the first preference in most purchases that the three armed forces undertake.
Under the new category for Indigenously Designed, Developed and Manufactured (IDDM) equipment, it will be mandatory for 40% of the content to be sourced locally.
The new DPP has many fresh ideas designed to accelerate defence acquisitions while encouraging indigenous companies under the flagship programme of Make in India. For instance, in order to cut down delays, the DPP henceforth mandates that all AONs (Acceptance of Necessity) of a particular platform will be valid only for only six months as against the 12 months deadline that it currently provides. Moreover, no AON will be notified until it is accompanied by a finalised RFP (Request for Proposal or detailed tender). In essence, this eliminates one intermediate stage since notifying an RFP after an AON used to be inordinately delayed.
The DAC has also revised the so-called defence offset clause, which will now be applied to contracts of more than Rs.2,000 crore instead of the current Rs.300 crore, thereby removing a hurdle to foreign companies eyeing the Indian market.
In another step that makes sure only genuine Indian companies participate in Buy Indian, Buy & Make Indian and Make cases, DPP clearly lays down definition of Indian Company. The company will have to be controlled and operated by Indian nationals to be eligible to participate in this category.
In an effort to give guaranteed business to Indian companies, the Make procedure has three distinct categories. In the Make Procedure category 1, the government will fund upto 90 per cent of the cost and will give upto 20 per cent advance for defence manufacturers to develop original equipment besides allotting a 20 per cent mobilisation advance to them. This category will be under the direct control of the Department of Defence Production (DDP).Similarly, category 3 will be earmarked for small scale industries.
Given the fact that in many cases, only one company has a particular product required by the armed forces, the new document will allow a ‘single vendor’ situation at every stage—bid submission, Technical evaluation and Staff evaluation—as long as the company complies with the laid down procedures.
Among other path breaking provisions in the new DPP relate to future projections and aligning them with the 15-year Long Term Integrated Perspective Plan (LTIPP). Each service HQ will be mandated to have a two-star officer heading a Project Management Unit (PMU) that will determine the future road-map in consultation with the defence industry. This will bring in synergy in the long-term planning between the MoD and the industry.
A new blacklisting policy for companies involved in wrongdoing and the concept of choosing strategic partners for major weapons platforms will be taken up in the next meeting of the DAC.