Defence Procurement Procedure 2020, Defence Reforms of India

The Defence Procurement Procedure (DPP), now known as the Defence Acquisition Procedure (DAP), is a guideline for acquiring military equipment in India.  The Ministry of Defence (MoD) has issued the long-awaited Defence Acquisition Procedure 2020 (DAP 2020), effective from October 1, 2020. It replaces the previous version, the Defence Procurement Procedure 2020.

The Defence Procurement Procedure 2020 governs the acquisition of capital defence equipment and aims to further boost indigenous manufacturing of defence equipment. It will apply to all acquisition projects without a published Request for Proposal (RFP), including those in the pre-acceptance of Necessity (AoN) stage, those in the AoN stage, and those in the Make and Design & Development (D&D) stage.

Defence Procurement Procedure

Upon its inception in 2002, the primary objective of the Defense Procurement Procedure (DPP) was to streamline and expedite the acquisition process of military hardware for the Armed Forces. However, in 2016, changes were made to focus more on promoting self-sufficiency in defence production by prioritizing military systems developed within the country. The creation of the Project Management Unit aims to make operations and decision-making more efficient.

Now, preference will be given to manufacturers of complete defence goods rather than just components. The offset policy has also been adjusted to provide more incentives for fulfilling offset obligations through direct purchases, technology transfers, and foreign investment. Moreover, steps have been taken to simplify trials and testing processes, including avoiding redundant trials and inspections.

Defence Procurement Procedure 2020

In September 2020, the Ministry of Defence introduced a new Defense Acquisition Procedure (formerly known as the Defense Procurement Procedure).  which outlines the process for acquiring military equipment in India. It aims to balance several factors:

1. Timely acquisition of equipment meeting performance, capability, and quality standards as needed by the armed forces.
2. Efficient use of allocated budget.
3. Ensuring the highest degree of integrity, public accountability, transparency, fair competition, and a level playing field for vendors.

Features of Defence Procurement Procedure

• Reservation for Indian Vendors: Certain categories such as Indian Indigenous Designed Developed and Manufactured (IDDM), Production Agency in Design & Development, etc., will be exclusively reserved for Indian vendors, with foreign direct investment (FDI) exceeding 49% not permitted.
• Import Ban on Certain Items: To bolster the domestic and indigenous defence industry, the Ministry of Defence will compile a list of weapons/platforms that will no longer be imported.
• Indigenisation of Imported Spares: Measures to encourage domestic manufacturing of parts have been implemented. This involves establishing co-production facilities through Intergovernmental Agreements (IGA) to achieve ‘Import Substitution’ and reduce the Life Cycle Cost.

Defence Procurement Procedure 2016

The primary purpose of the Defence Procurement Procedure is to establish smooth processes for defence procurement, with the overarching goal of achieving self-reliance in meeting the security needs of the Indian Armed Forces. This is to be accomplished by promoting the indigenous design, development, and manufacture of defence weapon systems and platforms on time, free from delays.

• The first chapter of the Defence Procurement Procedure (DPP) 
  2016 marked a significant introduction: the inclusion of a new procurement category known as Buy (IDDM), which stands for Buy (Indian Designed, Developed, and Manufactured). There are a total of six procurement categories outlined in the document.

• Second Chapter of Defence Procurement Procedure (DPP) – 2016
  This chapter focuses on the various stages that a procurement proposal must undergo from initiation to contract award. In DPP 2016, the acquisition cycle comprised 12 stages, whereas in the previous DPP 2013, it consisted of 11 stages.
  A notable addition in DPP 2016 is the introduction of the Request For Information (RFI) stage, which now stands as the initial stage among the procurement stages.
• Third Chapter of Defence Procurement Procedure (DPP) – 2016
  This chapter pertains to the sixth procurement category, namely ‘Make’ projects. It encompasses the indigenous design and development of prototypes for futuristic systems by Indian vendors in collaboration with foreign companies.
  These projects fall into two categories:
  a) Projects funded by the Ministry of Defence (MoD).
  b) Projects self-funded by developers.
  Under the first category, MoD will fund 90% of the project, a 10% increase from the previous 80%. The remaining 10% will be reimbursed if the Request for Proposal (RFP) for the product is not issued within two years of successful prototype development. Similarly, for the second category, projects undertaken by the Indian industry will have the entire development cost reimbursed by MoD if the RFP is not issued within two years of successful prototype development.
• Fourth Chapter of Defence Procurement Procedure (DPP) – 2016
  This chapter outlines procedures for shipbuilding. However, a committee established in September 2019 has been tasked with making necessary amendments to this chapter.
• Fifth Chapter of Defence Procurement Procedure (DPP) – 2016
  This chapter addresses the Fast Track Procedure, with no significant changes noted from the previous edition of DPP.

Defence Reforms of India

India’s defence sector is undergoing a wave of reforms aimed at modernisation, self-reliance, and improved efficiency. Here’s a breakdown of some key areas of reform:

Military Transformation:

• Integrated Defence Staff (IDS): Established in 2019, the IDS facilitates joint planning and operations among the Army, Navy, and Air Force, promoting a more unified approach.
• Theatre Commands: Restructuring the military into theatre commands is being explored. This would create geographically focused commands for better coordination and resource allocation.
• Focus on Technology: The creation of independent Defence Cyber and Space Agencies highlights the growing importance of these domains in modern warfare.

Enhancing Defence Procurement:

• Defence Acquisition Procedure (DAP) 2020: This streamlines the process for acquiring military equipment, emphasizing transparency, ‘Make in India’ initiatives, and faster procurement of indigenous technologies.
• FDI Reforms: Increased Foreign Direct Investment (FDI) allows for collaboration with foreign Original Equipment Manufacturers (OEMs) to bring in advanced technology and expertise while promoting domestic production through offset policies.

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