New Defence Acquisition Procedure of 2020 (DAP 2020)

Recently, a new Defence Acquisition Procedure (DAP) (erstwhile Defence Procurement Procedure or DPP), 2020 was released by the Ministry of Defence (MoD).

What is DPP?

The Defence Procurement Procedure mainly contains processes that needs to be followed to streamline and simplify defence procurement procedures and ultimately achieve the objective of self-reliance in meeting all the security needs of the Indian Armed Forces by promoting indigenous design, development and manufacture of Defence weapon systems and, platforms in a time-bound manner without any delays.

Aim:

DAP 2020 has been aligned with the vision of the Government of Atmanirbhar Bharat and empowering Indian domestic industry through Make in India initiative with the ultimate aim of turning India into a global manufacturing hub.
To ensure timely acquisition of military equipment, systems and platforms as required by the Armed Forces in terms of performance, capabilities and quality standards, through optimum utilisation of allocated budgetary resources.

Background:

The first Defence Procurement Procedure (DPP) was promulgated in 2002.
A committee under the chairmanship of Director General (Acquisition) was constituted to review the Defence Procurement Procedure (DPP) 2016.
DPP 2016 was released replacing the DPP 2013 based on the recommendations of Dhirendra Singh committee.
It focussed on indigenously designed, developed and manufactured weapon systems.
It was facing several issues like lack of transparency (leading to Rafale Scam), inconvenient offset regulations etc.

Highlights of the new policy:

Reservations for Indigenous firms:
The policy reserves several procurement categories for indigenous firms.
DAP 2020 defines an “Indian vendor” as a company that is owned and controlled by resident Indian citizens, with foreign direct investment (FDI) not more than 49 per cent.

New Buy (Global–Manufacture in India) category:

This stipulates indigenisation of at least 50 per cent of the overall contract value of a foreign purchase bought with the intention of subsequently building it in India with technology transfer.
Meeting the difficult indigenisation requirement would force the vendor to build the equipment in India, rather than supply most of it ready-built from abroad.

Greater indigenous content:

It promotes greater indigenous content in arms and equipment of the military procures, including equipment manufactured in India under license.
In most acquisition categories, DAP-2020 stipulates 10 per cent higher indigenisation than DPP 2016.

Measuring indigenous content:
Indigenous content will now be calculated on ‘Base Contract Price’, that is Total Contract Price, less taxes and duties.

Import embargo list:
The “import embargo list” of 101 items that the government promulgated last month has been specifically incorporated into DAP 2020. (An embargo is a government order that restricts commerce with a specified country or the exchange of specific goods.)

Offset liability:
The government has decided not to have an offset clause in procurement of defence equipment if the deal is done through inter-government agreement (IGA), government-to-government or an ab initio single vendor.

The offset clause requires a foreign vendor to invest a part of the contract value in India.

What are defence offsets?

The offset is an obligation by an international player to boost India’s domestic defence industry if India is buying defence equipment from it. Since defence contracts are costly, the government wants part of that money either to benefit the Indian industry, or to allow the country to gain in terms of technology.

Way Forward
Self-reliance in defence manufacturing is a crucial component of effective defence capability and to maintain national sovereignty and achieve military superiority.
The attainment of this will ensure strategic independence, cost-effective defence equipment and may lead to saving on defence import bills, which can subsequently finance the physical and social infrastructure.