First priority to Indian public and private sector for military procurements

Within months of allegations of kickbacks marring the Rs. 3,600-crore VVIP chopper deal with AgustaWestland, the Defence Ministry on Saturday put in place a new procurement policy that accords first priority to Indian public and private sector for military procurements. The new procedure also aims at plugging loopholes that allow corruption into defence deals.

Major changes in the Defence Procurement Procedure (DPP) were approved by the Defence Acquisition Council (DAC), the apex decision-making body of the Ministry, which met here under the chairmanship of Defence Minister A.K. Antony. The changes in the DPP were made with the twin objectives of “infusing greater efficiency in the procurement process and strengthening the defence manufacturing base in the country”. He said the only way forward for the country was rapid indigenisation of defence products, with both the public and the private sectors playing pivotal roles. The government would make all efforts to create genuine level-playing field for Indian manufacturing industries.

The Ministry also approved a proposal under which the Services headquarters would be required to freeze specifications of the desired products before they are approved by the DAC.

The new policy changes will also end the virtual monopoly of the public sector undertakings (PSUs) and ordnance factories in the defence sector as they will not be automatically nominated for maintenance and repair of systems procured from abroad, as private firms will be allowed to take part in these contracts. “Preference for indigenous procurement has now been made a part of DPP through an amendment that provides for a preferred order of categorisation, with global cases being a choice of last resort.

The first option would be to buy from India followed by ‘buy and make India,’” the MoD said, and added that an amendment had been approved to do away with nomination by the Department of Defence Production and facilitate the selection of Maintenance Transfer of Technology (MToT) partners by Indian bidders. “This measure is expected to have a positive impact on private sector participation in maintenance, repairs and overhaul work.”

Under the second category, private and public sector firms can tie up with foreign vendors and produce the equipment required by the armed forces within the country.

The DAC has also made it mandatory for the armed forces to explain to the Ministry when they do not prefer to buy from Indian sources or are excluding the higher category. The financial powers of the Services chiefs and the chief of the Coast Guard have been enhanced from Rs. 50 crore to Rs. 150 crore for capital acquisition cases. The other three categories include ‘Buy and make with Transfer of Technology’, ‘Make’ and the last option of buying the equipment from foreign vendors directly under the ‘Buy (global) category’.

In the DAC meeting on Saturday, Mr. Antony also gave up his powers to approve deviations from tender specifications by the bidders to the DAC, which includes the Defence Secretary and the three Services chiefs among several of its members.

Shaken by various scams in the recent past in defence deals, the Ministry has been working on amendments in its procurement policy for the last few months. It aimed to give a push to enhancing the defence manufacturing base in the country. “These changes in DPP are expected to expedite the acquisition process and increase transparency,” the MoD said in a release.

Simplifies procedures

The DAC meeting also simplified the procedures under the “buy and make India” category under which the Indian vendors form joint ventures with global firms to build required items in India. “The DAC has approved an amendment further simplifying this complex category. Its procedures have been brought on par with other categorisations, resulting in faster processing of cases under this category,” the release read.

The Ministry said it had a limited number of acquisition cases under the ‘Make' and the ‘Buy & Make (Indian)’ categories with an estimated value of Rs. 1,20,000 crore, and instructions had been issued for speedier conclusion of these cases.

To help the domestic industry prepare for meeting the requirements of the armed forces, the DAC approved release of a public version of its 15-year perspective document (LTIPP), for 2012-2027 outlining the ‘Technology Perspective and Capability Roadmap’ (TPCR). “The TPCR will provide useful guidance to the Indian defence industry for boosting its infrastructural capabilities and directing its R&D and technology investments,” it said.

To ensure that the forces have access to reliable supply chains in times of urgent need, the Ministry has defined the indigenous content “in an unambiguous manner, providing requisite clarity and a common understanding.”

The DAC also approved an amendment mandating consultations to begin sufficiently in advance of actual procurement by Services, so that capital acquisition plans can be translated into national defence Research and Development and production plans.

“In addition, a high-level Committee has also been constituted for simplification of ‘Make’ procedures, with a view to unleashing the full potential of this important category,” the Ministry said. Under the ‘Make’ procedures, the DRDO produces the equipment for the armed forces.

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