New Defence Procurement Policy makes sense
With a focus on indigenisation, transparency and procedural efficiency, the new Defence Procurement Policy seems to have shaped well. Some important parts have already been cleared by the Government, such as the new Indigenously Designed, Developed and Manufactured equipment category which will boost the domestic defence industry, as well as the new offset clause which requires only those foreign manufacturers with contracts over Rs2,000 crore, as opposed to the previous Rs300 crore limit, to source 30 per cent of their components from India. On Monday, Defence Minister Manohar Parrikar announced that the entire policy will be unveiled at the defence exposition in Goa later this month. There is still one chapter, dealing with ‘strategic partners', that is yet to be finalised. These ‘strategic partners' are private sector entities that the Government will identify for large, capital-intensive projects such as the production of helicopters, tanks and submarines. Once finalised, this will be an important first in the Government's significantly revamped approach to defence acquisition and manufacturing. Other important changes include an overhaul of the penalisation process to end the blanket blacklisting of firms that have been accused of wrongdoing. Currently, firms are banned the moment there is a charge against them. This is akin to being held guilty until proven innocent — and the latter often takes several years. Meanwhile, defence acquisitions are stalled and war preparedness hampered. Under the new policy, firms will have the opportunity to present their case before facing punitive measures. There will also be graded punishments in keeping with the quantum of wrongdoing. In case of serious charges, temporary measures (with deadlines) will kick in until a committee finally decides on the merits of the case.
A related change is the legitimisation of company agents these authorised representatives play an important role, providing technical expertise or management support, but are often portrayed as unscrupulous middlemen. By recognising them as part of the business arrangement, the Government is making the process transparent and more accountable. A third change is with regard to the single-vendor situation. While it is preferable to have more competition, there are times when only one firm has the product that meets all the requirements. However, in such situations, bureaucrats are often reluctant to proceed, fearing corruption charges at a later stage. The new DPP takes the poison out of the single-vendor situation. Another important change is the addition of the Enhanced Performance Parameters which shifts the bottomline from the cheapest product to the best value product. Currently, the bidder offering the lowest price wins hence, manufacturers often cut corners and the military gets a bare-bones product. With a little more flexibility now, the Government can get a lot more bang for its buck.