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In new Defence Procurement Procedure, MoD creates category for leasing equipment

Union Defence Minister Rajnath Singh.   | Photo Credit: PTI

The Ministry of Defence (MoD) has for the first time introduced leasing of defence equipment as a new category for acquisition in the draft Defence Procurement Procedure (DPP) 2020.

The draft was released by Defence Minister Rajnath Singh on Friday for further suggestions from industry before being finalised for promulgation. It will come into effect from April 01, 2020 and supersede DPP 2016. “This DPP would remain in force till 31 March 2025,” the draft said.

Other proposed measures include making after-sales support part of the capital acquisition contract, higher indigenous content in acquisitions and incentives for local material and software and emphasis on product export under offsets.

The draft was finalised by a committee headed by Director General Acquisition, which was set up in August 2019.

Leasing has been introduced as a new category for acquisition in addition to the existing ‘Buy’ and ‘Make’ categories to substitute huge initial capital outlays with periodical rental payments, the draft stated.

“Leasing is permitted under two categories, Lease [Indian] where Lessor is an Indian entity and is the owner of the assets and Lease [Global) where Lessor is a Global entity. This will be useful for military equipment not used in actual warfare like transport fleets, trainers, simulators, among others,” the draft stated.

The draft proposed increasing the indigenous content stipulated in various categories of procurement by about 10% to support the ‘Make in India’ and a simple and realistic methodology had been incorporated for verification of indigenous content for the first time, the MoD said. It included “assurance of procurement on a single vendor basis from Aero Engine manufacturing unit and chips from FAB manufacturing units established in the country.”

New chapters

New chapters have been introduced for procurement of software and systems related projects due to fast obsolescence, Post Contract Management to facilitate and provide clear guidelines, given long time of defence deals. Another new category introduced is ‘Buy’ (Global – Manufacture in India) with minimum 50% indigenous content on cost basis of total contract value.

The scope and options for product support have been widened to include contemporary concepts like Performance Based Logistics (PBL), Life Cycle Support Contract (LCSC) and Comprehensive Maintenance Contract (CMC) to optimise life cycle support for equipment. “The capital acquisition contract would normally also include support for five years beyond the warranty period,” it added.

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Printable version | Jan 19, 2021 2:44:50 AM | https://www.thehindu.com/news/national/in-new-defence-procurement-procedure-mod-creates-category-for-leasing-equipment/article31121754.ece

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