The Defence Acquisitions Council (DAC) will be putting its seal on the amended Defence Procurement Procedures (DPP) introducing some major changes in its defence procurement policy,giving a priority to local companies,the offsets policy as well as issues relating to FDI at its tomorrow meeting.
The proposed amendments would result in defence offsets being mostly clustered around engineering services that are universally quantifiable.
Along with the change in offsets,the MoD is also set to approve a proposal to put Buy and Make (Indian) as the top category for procurement. The ‘India First’ policy will provide first opportunity in all contracts to both private and public sector companies, while placing procurement from foreign suppliers as the last option.
The move would be a major shift from existing priority given to acquisitions from foreign companies,which today accounts for 70 % of purchases. Most of the remaining is procured from Indian public sector units and ordnance factories while Indian private sector only gets a very limited number of defence contracts. “These private sector companies will now get a significant boost opening new opportunities for supplying equipment as well as establishing joint ventures with foreign producers of military systems,” revealed sources.
Sources confirmed to FE,that the new DPP would liberalise defence procurement further. This conformed to industry expectations,as it has been the trend in successive modifications to the DPP in 2005,2006,2008 and the currently valid DPP-2012.
For the defence ministry a defence industrial backbone is crucial for maintaining,repairing,overhauling and upgrading the complex defence platforms that are currently being bought overseas and manufactured under licence in India.
At various foras the MoD and officers of the armed forces have urged industry to develop small and medium enterprises (SMEs),which would produce the components that would go into larger and more complex system that would eventually be built by large conglomerates like the Tatas,L&T and others.
In the new DPP the government is set to remove software and consultancy services out of defence offsets in the wake of Italian investigators finding that middlemen involved in the VVIP helicopter scandal.
Indian private sector only gets a very limited number of defence contracts. During the last financial year,the entire amount meant to fund development of prototypes under Make (India) category was left unused. None of the major contracts,such as Battlefield Management System and Tactical Communication System,under Make (India) category,in which Indian private sector and public sector have equal opportunity,have made much progress beyond preliminary stage.