Defence Procurement Procedure Current Affairs - 2020

Defence Minister launches draft of Defence Procurement Procedure, 2020

On March 20, 2020, the Defence Minister Shri Rajnath Singh launched the draft of new Defence Procurement Procedure. The new procedure aims to increase the indigenous manufacturing.

Highlights

The new procedure aims to increase Indigenous Content ratio. The ratio is the percentage of content of the defence equipment built in India. For instance, the Indigenous Content Ratio of Light Combat Aircraft Tejas is 75.5%.

The procedure also incentivizes raw materials like special alloys and software.

Buy Global

The procedure has introduced “Buy Global” category. Under this category, only minimum necessary is to be bought from abroad.

Key Features of DPP, 2020

The new procedure has introduced Leasing as a new category. This is to replace huge initial payments with periodical rental payments. A new system has been introduced for software procurement. This is because, software gets updated at faster rates out of all other technologies.

What is Defence Procurement Procedure?

The Defence Procurement Procedure is the process that is followed to simplify procurement of defence equipment.

What is Open General Export Licence issued by Defence Minister?

Defence Minister Rajnath Singh has approved issuance of two Open General Export Licences (OGELs) for export of certain parts and components as well as intra-company transfer of technology to select countries. This decision is expected to give a boost to defence exports and enhance ease of doing business (EDB).

Key Highlights of OGEL

The OGEL is a one-time export licence to be granted to a company for a specific period which would initially be only two years.

The OGEL policy was formulated by DPP, following a demand by exporters and after holding extensive consultations with various stakeholders. Once formulated, the policy was submitted for Defence Minister’s approval.

Countries allowed under OGELs: France, Belgium, Germany, South Africa, Spain, Sweden, Mexico, Canada, Italy, Japan, Poland, UK and USA.

The application for grant of OGEL will be considered by Department of Defence Production, Defence Procurement Procedure (DPP) on a case-to-case basis. Export of items to a Special Economic Zone (SEZ) is not permitted.

The applicant is mandatory to have Import-Export certificate, for acquiring licences. The quarterly and end of the year reports on all transactions done under OGELs should be submitted to DPP for examination and post-export verification.

Items permitted under OGEL includes: components of fuse and ammunition setting device without energetic and explosive material, firing control and related warning equipment as well as body protective items. Complete aircraft or complete unmanned aerial vehicles (UAVs) and any components specially designed/modified for UAVs are excluded under this licence.

Condition: The transfer of technology to permitted countries is subjected to condition that- export is an intra-company transfer either from an Indian subsidiary or applicant exporter to its foreign parent company and/or to the subsidiaries of the foreign parent company.

India’s Defence Export

India has made significant strides in improving its defence exports and these have grown seven fold over last 2 years and reached to Rs.10,500 crore rupees in 2018-19. This has been made possible due to the reforms brought in standard operating procedure (SOPs) and ushering in a portal for online clearance of applications. Moreover, the processing time has been brought down significantly.