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New defence purchase policy comes into effect

More than a month after it announced major changes in procurement rules,the Defence Ministry on Saturday formally put the new defence procurement

Written by Express News Service | New Delhi |
June 2, 2013 1:46:53 am

More than a month after it announced major changes in procurement rules,the Defence Ministry on Saturday formally put the new defence procurement procedure into effect that incorporates changes in the offset guidelines that were finalised in October last year.

A series of changes have been necessitated by both recent scandals and the shrinking capital budget with the government introducing a categorisation criteria that puts purchases of military equipment from foreign vendors as the last priority. The policy is aimed at providing incentives to the private sector to increase its share of the arms market and promotes joint ventures with foreign firms.

However,the policy has prompted questions about its effectiveness as there has been no policy decision for an increase in the FDI cap,deterring collaborations of domestic players with foreign manufacturers.

The ministry says that it has attempted to “create genuine level playing field for Indian manufacturing industries vis-à-vis global players” and reduce the monopoly of Defence PSUs. Government owned PSUs tend to get a large share of the money that comes through offsets but this will change with the elimination of the clause of “nomination” of a particular agency for Maintenance Transfer of Technology.

A formal preferred order of categoristion has been introduced with Buy (Indian) named as the top priority and Buy (Global) as the fifth and last. It also states that armed forces will now need to state reasons for not going with the top priority.

Learning from the example of the VVIP chopper scandal where technical requirements were changed at the last minute before issuing of tenders,the new rules have a clause to freeze the technical requirements in advance,in an effort to promote transparency. The Service Qualitative Requirements will now be frozen before the Acceptance of Necessity stage — when the government gives a service the go-ahead to start a procurement project.

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