New defence purchase policy changes dynamics

Ajay Banerjee

Tribune News Service

New Delhi, January 11

The Ministry of Defence (MoD) today gave nod to major policy changes that will give top priority to locally produced equipment and fund Indian private companies to do research and development.

It, however, deferred addressing two key issues: One, having a method on blacklisting, or not blacklisting, of firms indulging in wrongdoing; and two, on having guidelines to select international strategic partners for producing major equipment in India.

The Defence Acquisition Council (DAC), the apex decision-making body of the MoD, took the decision at a meeting chaired by Defence Minister Manohar Parrikar today. The DAC allowed changes to the Defence Procurement Procedure (DPP)-2013 following a yearlong review. A committee of experts headed by former Union Home Secretary Dhirendra Singh suggested changes to the DPP.

The DPP will now have a new category called the ‘IDDM’ (Indigenously Designed Developed and Manufactured) platforms. This will get top priority and will be first to be chosen for tenders. It will be mandatory to have 40 per cent local content in case the design is indigenous. In case, the design in not Indian then 60 per cent local content will be mandatory. The definition to be counted as an ‘Indian company’ is a company that is controlled and operated by Indian nationals. “This way the Intellectual Property Rights’ remain within the country “, a source said.

The DPP allows a certain leverage to foreign companies. It raises the limit of ‘off-sets’ from Rs 300 crore to Rs 2,000 crore. ‘Off-sets’ are a provision that makes foreign companies to mandatorily procure 30 per cent of the supplies from Indian partners, in case of winning a bid of Rs 300 crore or more. This limit has been raised to Rs 2,000 crore, as not many Indian companies are available to absorb so such of technology infusion.

Another major change in the DPP is the policy to fund Indian private entities in research development to encourage more local development. Parrikar today said: “The medium and small-scale industries will get opportunities.”

The Department of Defence Production will fund up to 90 per cent of the R&D of which 20 per cent will be given in advance and in 24 months the entity will be given a tender. If the tender is not given, the private company will get a refund of its expenses. A medium-scale industry will get a funding of Rs 10 crore for research and development. Another will be industry funded under assured order.

On blacklisting, the Dhirendra Singh committee suggested to disallow any bans against any equipment for misdeeds of company employees. The DPP sets ups an empowered committee to solve disputes or unforeseen issues. Till now disputes went up to DAC.