The much-awaited changes to the Indian Defence Procurement Policy (DPP)-2013 are now in. The focus is firmly on boosting home-grown manufacturing. A new category has now been inserted in the DPP called the "IDDM" or "Indigenously Designed, Developed and Manufactured" platforms. As per the policy, IDDM will get top priority and will be first to be chosen for tenders. India is one of the biggest importer of defence products globally.
Under the new rules, indigenously made defence equipment must have at least 40 per cent Indian components. However, in case the design is not Indian, at least 60 per cent of its components must be Indian. In order to encourage research and development in the private sector, the department of defence production has been asked to bear 90 per cent of design and development cost of major systems. Small and medium scale industries will be given from Rs 3-10 crore in funding for design and development and contract within 24 months. "If we cannot give them the contract, then we propose to refund their entire cost," the defence minister Manohar Parrikar said on January 11.
"I will try to ensure that at least 30% of our procurement is sourced from them. Defence public sector companies have been instructed to source as much as possible from small and medium industries," the minister said.
There are changes made to the practice of off-set too. Off-set means where a foreign vendor has to source certain percentage of the contract from Indian companies. Now it has been changed. Off-set will be applicable for contracts worth over Rs 2,000 crore. Earlier it was Rs 300 crore. The rationale for the change is because not many Indian companies are available to absorb so much of technology infusion.
For disputes redressals, the DPP has now a provision to set up an empowered committee. Till now disputes went to the defence acquisition committee under the defence ministry. Also, each of the three Services will have a Major General-rank officer for project management to be run on road map in line with the long-term perspective plan.
As India has limited choices in defence equipment technology production, the modified DPP says bids can be accepted even if there is only one supplier.
The entire focus, including that of looking for strategic partners to manufacture critical equipment like fighter jets, encourages business and enterprise in India.
"Therefore we didn't think fit to continue with the previous off-set policy," the defence minister said.
India has embarked on a massive defence modernization programme and during his recent visits abroad, Prime Minister Narendra Modi has emphasized that the manufacturing should be done in India.
The new DPP will now make it possible for Indian manufacturers to locally build a large chunk of defence equipment like the Russian Kamov helicopters, Sea Fighter Jets and artillery guns within India.
BW Reporters
Ashish Sinha is an experienced business journalist who has covered FMCG, auto, infrastructure, tourism, telecom among several other beats. Ashish has keen interest in the regulatory scenario impacting different sectors. He writes on aviation, railways, post and telegraph, infrastructure, defence, media & entertainment, among a wide variety of other subjects.
