The Defence Acquisition Council (DAC) on Monday cleared new clauses to the proposed Defence Procurement Policy (DPP).
The most important takeaway is the increase in the offset baseline from Rs 300 crore to Rs 2,000 crore. However, even beyond that, the policy promises to make the defense market more lucrative for Indian industry.
Defence Minister Manohar Parrikar stressed that the new policy will ensure the modernisation of defence forces remains unaffected — least due to procedural intricacies. “Every word (of the DPP) had become a gate” to stall projects during the previous government, he alleged.
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The new DPP has stressed reducing delays in procurements by eliminating repetitive procedures. It has also introduced certain clauses which allow procurements in case of single vendor situations with “proper justifications”. Interestingly, the government is also “ready” to pay up to 10 per cent extra for those products which are better than others. This will ensure that the armed forces — the end users– will benefit.
The DPP will also have a new category of Indigenously Designed Developed and Manufactured (IDMM) as the most preferred category for procurements. The three sub procedures under the “Make” category aim to boost domestic private and small scale industry.
Decisions on strategic partnerships, blacklisting and middlemen are still awaited though.
While the changes proposed will be implemented only after about two months, the practicalities/shortcomings of the new DPP will be visible only once it is implemented and contracts are executed under these guidelines. Industry, which was eagerly awaiting the new guidelines is so far welcoming of the changes. “The new category of Buy Indigenously Designed, Developed and Manufactured Equipment is ingenious. This changes everything. The impact will be far-reaching and will have cascading effect. This will change India from being a destination for low-cost manufacturing, to being a starting place for cutting-edge innovation; from being a consumer of out-dated equipment to being a producer of trail-blazing technology; from being the world’s largest importer to being a leader in export of defence equipment,” said Ashok Atluri, Managing Director, Zen Technologies.