Defence Procurement Procedure Current Affairs

DAC approves measures to simplify Defence Procurement Procedure

The Defence Acquisition Council (DAC) chaired by Union Defence Minister Nirmala Sitharaman has approved various measures to simplify Defence Procurement Procedure (DPP). DAC is Defence Ministry’s highest decision-making body on capital procurement of Indian Armed Forces (Army, Navy and Air Force).

Key Facts

These measures will be incorporated in DPP-16, the manual governing defence procurement procedure. The changes include devolution of powers within Ministry of Defence and Service Headquarters, deletion of repetitive processes, concurrent running of acquisition process instead of sequential stage clearance, aligning of various documents with revised financial guidelines, amongst others.

Comment

These amendments form part of ongoing Business Process Re-engineering in Defence Capital procurements of armed forces. It is in line with continuation of Defence Ministry’s efforts to streamline DPPs and reduce timelines so as to ensure timely delivery of equipment to Armed Forces. These measures will also obviate undue procedural delays and hasten activities besides shrinking procurement timelines.

Background

The Union Government so far has cleared proposals worth Rs 4 lakh crore of military procurement involving close to 135 proposals as part of its efforts to modernise armed forces. But most of these proposals are yet to be implemented due to procedural delays hampering speed of modernisation of armed forces.

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DAC approves major changes in Defence Procurement Procedure

The Defence Acquisition Council (DAC) chaired by Union Defence Minister Manohar Parrikar has approved major changes in the new Defence Procurement Procedure (DDP) 2016.

These changes were made in DPP 2016 to streamline defence acquisitions and give a big impetus to indigenisation of Defence sector through the ‘Make in India’ initiative.

Some of the changes were based on recommendations of the expert committee headed by former Home Secretary Dhirendra Singh.

Major Changes are

  • Addition of new category to promote domestic manufacturing, including government funding.
  • The funding will be mainly in technology development for Research & Development (R&D) and recognition of the Micro, Small and Medium Enterprises (MSME).
  • New category Indigenously Designed, Developed and Manufactured (IDDM) platforms have been added and it will be the priority route for procurements.
  • Under IDDM, there will be two sub-categories one with mandatory 40 percent domestic content for a domestic design.
  • Other will be for mandating 60 percent local content if the design is not domestic. Under it, eligible domestic companies will have majority Indian control and operated by Indian nationals.
  • Government will fund private R&D for building a defence technology base in the country for which various norms have been stipulated. Under it companies are eligible for up to 90 percent funding.
  • Contentious issue of offsets has been amended from the current 300 crore rupees to 2000 crore rupees to give flexibility for foreign companies.
  • Currently, offset clause mandates that a foreign company should invest 30 percent of the contract value back into the country with a view to bring in technology.

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