New MoD procurement policy proposes ban on import of specific weapons

By Ajai Shukla

Business Standard, 30th July 20

The Ministry of Defence (MoD) on Tuesday issued a second draft of the Defence Procurement Procedure of 2020 (DPP-2020) and solicited comments by August 10, four months after it put out the first draft of the new manual that will supersede and update the current DPP-2016.

“Based on inputs received from the environment, DPP 2020 has now been titled as Defence Acquisition Procedure (DAP) 2020,” stated the MoD. Driving this terminological change is the conviction that the policy should look beyond procurement (purchase) of equipment and also provide for alternatives such as leasing and upgrading.

The draft DAP-2020 retains the first draft’s emphasis on promoting higher indigenous content in defence equipment manufactured in India, including under licence from foreign vendors. For most acquisition categories, the DAP-2020 will demand 10 per cent higher indigenisation than under DPP-2016. (see graphic below)

Indigenisation targets for various acquisition categories

Ser No	Acquisition Category	Indigenous Content (IC)
(a)	Buy (Indian – Indian Designed, Developed and Manufactured)	Indigenous design essential; and ≥ 50% IC
(b)	Buy (Indian)	If indigenously designed, ≥ 50% IC; if foreign designed ≥ 60% IC
(c)	Buy and Make (Indian)	≥ 50% IC, calculated on the ‘Make’ portion
(d)	Buy and Make	≥ 50%  IC
(e)	Buy (Global - Manufacture in India)	≥ 50% IC
(f)	Buy (Global)	Foreign Vendor – Nil IC requirement Indian Vendor ≥ 30%  IC

For the first time, the MoD proposes to incorporate into official policy a ban on the import of specific kinds of weapons and platforms.

“With a view to promote domestic and indigenous industry as also align the DAP with the reforms enunciated in the ‘Atmanirbhar Abhiyan’ (self-reliance campaign), the MoD will notify a list of weapons/platforms banned for import, updated from time to time,” the draft states.

It is unclear whether this “no import list” will be aligned with the MoD’s Defence Production Policy (DPrP) of 2018, which mandates self-reliance by 2025 in the production of helicopters, fighter aircraft, warships, tanks and missiles.

DPrP-2018 also stipulates raising defence exports to $5 billion annually by 2025, and producing defence goods and services worth $26 billion to create employment for 2-3 million people.

The MoD has also introduced a new new procurement category, entitled “Buy (Global – Manufacture in India)”. This stipulates indigenisation of at least 50 per cent of the contract value of a foreign purchase bought with the intention of subsequently building it in India with technology transfer. 

Meeting this would require vendors to supply only the minimum necessary numbers from abroad in ready-built condition, while manufacturing a larger share in India. 

This category also allows vendors to meet the indigenous content requirement through manufacturing spares and assemblies, or setting up maintenance, repair and overhaul (MRO) facilities for the equipment, including through the foreign vendor’s subsidiary in India. 

  

The draft DAP-2020 details the procedures for “leasing” of equipment and platforms. Leasing is expected to save money by permitting the military to rent back-up equipment and services, such as air transport, mid-air refuelling, MRO and simulator training, rather than incurring huge capital outlays in buying outright. 

In addition to a full new chapter on “leasing”, the draft DAP-2020 also incorporates a new chapter for procuring equipment and platforms based on software and information and communications technology (ICT). Given the rapid obsolescence of ICT-based systems, more flexible procurement processes are needed to keep up with technological change.

Another new chapter deals with “post contract management.” This lays down guidelines and processes for issues that arise during the contract period, which typically last for several decades in defence contracts.

While aiming at speeding up procurement, the new procedure marginally slows down the Fast Track Procedure, which is designed for emergency purchases. DPP-2016 mandated a maximum period of 112-169 days for concluding a contract, including the time for trial evaluation. Now, DAP 2020 stipulates a slightly longer period of 122-231 days. In both cases, delivery of the equipment would take another 3-12 months from the date of contract signing.

The new acquisition procedure is being drafted by an MoD committee headed by its acquisitions chief, Apurva Chandra.