The government has been firm in its commitment to the ‘Make in India’ initiative in the defence sector for nearly a decade. The outcomes so far have been mixed but encouraging enough to continue with the emphasis on sourcing and procuring defence equipment and platforms from Indian companies. Many policies have been amended, introduced, and updated to facilitate this journey towards atmanirbharta (self-reliance) in defence. More importantly, a need for a mindset change in the bureaucracy regarding acquisition and procurement has also been observed.
However, some old habits die hard. For instance, clause 2.4.8 in the Defence Procurement Manual (DPM) 2009 mandates that the defence forces cannot purchase items from private industry if those items are also manufactured by government entities such as OFBs and DPSUs. In those years, this requirement was based on the premise that government funds should be best used to support government entities and protect them from competition with the private sector.
While this strategy may have been reasonable in the past when defence production was reserved for government entities, it no longer aligns with the current broader objectives of the “Make in India” initiative. This initiative, which has led to significant growth and investment in the domestic defence manufacturing sector, underscores the urgent need for a new strategy.
The “Make in India” program has encouraged the participation of various private companies, leading to the development of a more diverse and competitive ecosystem. However, an unintended outcome of the continued application of clause 2.4.8 is the inadequate availability of quality products at competitive prices. By restricting the procurement process to a predetermined list of suppliers, the rules prevent the armed forces from accessing innovative solutions, competitive pricing, and technological advancements that the expanded domestic defence industry can offer.
To overcome these challenges, the “Make in India” initiative has encouraged private industry to invest without government funding. This larger framework has enabled private defence companies to get licenses to manufacture defence goods. However, the restrictive clauses like 2.4.8 from the past continue to persist, which requires a critical review.
The government must insist on a competitive tendering process to ensure value for money in any public procurement. It would allow the armed forces to benefit from the wider field created by the “Make in India” initiative, accessing a diverse range of products and modern technologies at more competitive prices.
It is understood that the DPM 2009 is under review, and a revised edition may be notified in the coming months. Still, even before the entire manual is amended, the government can ensure a level playing field for the powers by amending clause 2.4.8 of the DPM 2009 as an immediate measure.
A more inclusive and transparent approach, such as a one-time assessment and empanelment process for approved suppliers, with periodic reviews and revisions, would allow new and existing players to demonstrate their capabilities and be considered for inclusion. Moreover, authorities can also assess the annual production capacity of the manufacturers as a factor in the procurement process, ensuring a more equitable distribution of orders and opportunities for all domestic defence manufacturers, both government-owned and private. This revised approach would foster greater competition and encourage continuous improvement and innovation within the defence manufacturing sector. It would also align with the broader objectives of the “Make in India” initiative, which aims to enhance self-reliance and global competitiveness in the defence industry.
The evolving landscape of the Indian defence industry certainly calls for a critical review and revision of this restrictive clause. By embracing a more inclusive and dynamic approach to procurement, the government can unlock the full potential of the domestic defence manufacturing ecosystem, fostering innovation, competitiveness, and value for money in this crucial sector.
Team BharatShakti
