The government plans to set up a Defence Procurement Organisation (DPO) to integrate and streamline the long and arduous process of defence acquisitions.
A government appointed committee, headed by former Director of Indian Institute of Management (IIM) Lucknow, Dr. Pritam Singh, has submitted a report on the modalities of setting up the DPO to Defence Minister Manohar Parrikar on Thursday.
“The aim is not to create another bureaucracy. The DPO will be a vertical under the Defence Ministry and the philosophy is to integrate the processes,” defence sources said on Friday.
The Defence Procurement Process, which applies to all defence capital procurements, has been modified several times to bring in transparency and speed up acquisitions but it continues to be lengthy and complicated.
Observing that the main motive of the procurement process should be to create an engine of growth, sources said: “In the present system the focus on development is low key while production process is mostly with the Defence Public Sector Undertakings (DPSU). There is no match between the capabilities of the two.”
“The report has just been submitted and is being studied. The time frame is about 2-3 years for the structures to fall in place,” sources stated.
More power
In a related move to shorten the procurement cycle, the Cabinet Committee on Security (CCS), chaired by the Prime Minister earlier this week, has increased the financial powers of the Defence Minister.
In the past, the Defence Minister was entitled to clear deals up to ₹500 crore, which has now gone up to ₹2,000 crore Jointly, the Finance Minister, the Defence Minister can approve projects up to ₹3,000 crore, up from the earlier ₹1,000 crore. The Defence Secretary too has now been given financial powers upto ₹500 crore to clear deals. This ensures that a major chunk of the procurements are approved within the Ministries, sources said. About 70% of the deals by number are below ₹3,000 crore. So now only deals of ₹3,000 crore and above would go to the CCS for approval.
