In an effort to give a boost to 'Make in India' project of the NDA Government in defence manufacturing, the draft of Defence Procurement Procedure(DPP) 2020 proposes higher indigenous content and incentives for local material and software.
The draft unveiled by Defence Minister Rajnath Singh on Friday here also provides for making after sales support a part of capital acquisition contract, leasing of defence equipment introduced for the first time and emphasis on product export under offsets. The proposed DPP also offers incentive under offsets for units in Defence corridor.
The main focus of the DPP 2020 is to further increase indigenous manufacturing and reducing timelines for procurement of defence equipment. These and several other such innovative measures were part the draft finalized by a high-level committee headed by Director General Acquisition, Ministry of Defence that was set up in August 2019.
Speaking on the occasion, the defence minister said the objective of the DPP is to make India self-reliant and a global manufacturing hub. The government is constantly striving to formulate policies to empower the private industry including MSMEs in order to develop the eco-system for indigenous defence production. The defence industry of India is a strategically important sector having huge potential for growth. It needs to be the catalyst for India's economic growth and realisation of our global ambitions.
With experience gained by the industry and the Ministry of Defence , it is now time to take further steps to strengthen 'Make in India' initiative, refine Life Cycle Support of procured equipment and platforms and hasten the defence acquisition process by further simplifying the procedures & reducing the overall procurement timelines, he added.
The major changes proposed in the new DPP are hike in indigenous content ratio by more than ten per cent to support Make In India. Also, use of raw materials, special alloys and software incentivised as use of indigenous raw material is a very important aspect of 'Make in India' and Indian Companies are world leaders in software. A new category Buy(Global-Manufacture in India) is part of the proposed DPP with minimum 50 per cent indigenous content.
Leasing has been introduced as a new category for acquisition in addition to existing 'Buy' & 'Make' categories to substitute huge initial capital outlays with periodical rental payments. Leasing is permitted under two categories i.e, 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 and simulators.
The scope and options for Product Support have been widened to include contemporary concepts in vogue, namely Performance Based Logistics (PBL), Life Cycle Support Contract (LCSC), 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.
The DPP draft was prepared by a Review Committee based on the recommendations of all stakeholders, including private industry. In order to accrue advantage of domain specialisation of various subject matter experts, eight sub-committees headed by Lt Gen/equivalent officers were constituted to assist the review committee. These committees carried out extensive deliberations and interactions over a period of six months to formulate their respective charters.