India’s defence industry is now capable of manufacturing wide variety of high-end requirements e.g. tanks, armoured vehicles, fighter aircrafts, helicopters, warships, submarines, missiles, electronic equipment, special alloys, special purpose steels, and variety of ammunition.

The value of indigenous defence production for Financial Years 2020-2021 and 2021-2022 was Rs 84,643 crore and Rs 94,846 crore respectively.

Domestic Procurements

The Government, in the last three years, ie, from 2019-20 to 2021‑22 and current year (2022-23 up to September, 2022), had accorded Acceptance of Necessity (AoN) to 163 proposals worth Rs 2,46,989.38 crores approximately, under various categories of capital procurement which promote domestic manufacturing as per DAP-2020.

The share of domestic procurement in the total procurement has seen an upward trend. In 2018-19, the domestic procurement stood at 54% of the total procurement; this figure jumped to 59% in 2019-20 and to 64% in 2020-21. In 2022-23, it has been increased to 68% for domestic procurement, of this 25% budget has been earmarked for procurement from private industry.

With focus of Government on indigenisation and procurement of defence products from the domestic resources, the expenditure on defence procurement from foreign sources has reduced from 46% to 36% in the last four years i.e. from 2018-19 to 2021-22.

Domestic Projects Realised

With focus on indigenisation and procurement from domestic industries, all the major areas of domestic defence production ecosystem such as weapons, ammunition, fighter aircrafts, helicopters, missile systems, warships, submarines, armoured vehicles, radars, communication systems, surveillance systems, etc. have benefited from the initiatives and also given boost to the growth of domestic industries including MSMEs and start-ups.

Many significant projects that have been produced in the country during the last few years include (alphabetically listed):

• 155 mm Artillery Gun system ‘Dhanush’
• 25 ton Tugs
• Advanced Light Helicopter
• Anti-Submarine Warfare Corvette (ASWC)
• Arjun Armoured Repair and Recovery Vehicle
• Armoured Personnel Carrier ‘BMP-II/IIK’
• Bi-Modular Charge System (BMCS) for 155mm Ammunition
• Bridge Laying Tank,
• Cheetah Helicopter
• Dornier Do-228
• Fast Interceptor Boat
• High Mobility Trucks
• INS Chennai
• INS Kalvari
• INS Khanderi
• Inshore Patrol Vessel
• Integrated Air Command and Control System (IACCS)
• Lakshya Parachute for Pilotless Target Aircraft
• Landing Craft Utility
• Light Combat Aircraft ‘Tejas’
• Main Battle Tank ‘Arjun’
• Medium Bullet Proof Vehicle (MBPV)
• Offshore Patrol Vessel
• Opto Electronic Sights for Battle Tanks
• Software Defined Radios (SDR)
• Su-30 Mk1
• Surface to Air Missile system ‘Akash’
• T-72 Tank
• T-90 Tan
• Unmanned aerial vehicles
• Water Jet Fast Attack Craft
• Weapon Locating Radar (WLR)

Further, for the first time, a Made-in-India Advanced Towed Artillery Gun (ATAG) howitzer gun developed by our industry was part of the 21-gun salute during the Independence Day celebration at Red Fort in Delhi.

Policy Initiatives to Encourage Self-Reliance

These projects are the result of several policy initiatives and reforms taken by Government in the past few years to encourage indigenous design, development and manufacture of defence equipment, there by promoting self-reliance in defence manufacturing in the country.

 These initiatives include:

• According priority to procurement of capital items of Buy Indian (IDDM) category from domestic sources under Defence Acquisition Procedure (DAP)-2020.
• Earmarking of 25% of R&D Budget for Industry led R&D.
• Establishment of two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu.
• Implementation of Public Procurement (Preference to Make in India) Order 2017.
• Launch of an indigenization portal namely SRIJAN to facilitate indigenisation by Indian Industry including MSMEs.
• Launch of Innovations for Defence Excellence (iDEX) scheme by involving Start-ups & Micro, Small and Medium Enterprises (MSMEs).
• Launch of Mission DefSpace.
• Liberalisation of Foreign Direct Investment(FDI) policy allowing 74% FDI under automatic route.
• Notification of  four  ‘Positive  Indigenisation  Lists’  of  total  411  items  of  Services  and  three  ‘Positive Indigenisation Lists’ of total 3738 items  of Defence Public Sector Undertakings (DPSUs), for which there would be an embargo on the import beyond the timelines indicated against them.
• Opening up of Defence Research & Development (R&D) for industry, start-ups and academia with 25 percent of defence R&D budget.
• Progressive increase in allocation of Defence Budget of military modernisation for procurement from domestic sources, etc.
• Reforms in Offset policy with thrust on attracting investment and Transfer of Technology for Defence manufacturing by assigning higher multipliers.
• Simplification of Industrial licensing process with longer validity period.
• Simplification of Make Procedure.

Specific provisions have been introduced in DAP-2020 under ‘Buy and Make (Indian)’ and ‘Buy (Global – Manufacture in India)’ category, wherein indigenous production is carried out with Transfer of Technology (ToT) from foreign OEM.

To enable adoption of Artificial Intelligence in defence, Defence AI Council (DAIC) and Defence AI Project Agency (DAIPA) has been created. Further, an AI roadmap has also been finalised for each Defence Public Sector Undertaking (DPSU) under which 70 defence specific AI projects have been identified for development.

Government has notified the ‘Strategic Partnership (SP)’ Model which envisages establishment of long-term strategic partnerships with Indian entities through a transparent and competitive process, wherein they would tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chains.

The expenditure on defence procurement from foreign sources has reduced from 46% of overall expenditure in 2018-19 to 36.7% as per data till December 2022.

Research & Development

Defence Research & Development (R&D) has been opened up for industry, start-ups and academia with 25 percent of defence R&D budget earmarked, to promote development of defence technology in the country.

Defence Research and Development Organisation (DRDO) identified nine thrust areas for focused research, namely Platforms, Weapon System, Strategic Systems, Sensors & Communication Systems, Space, Cyber Security, Artificial Intelligence & Robotics, Material & Devices and Soldier Support.

Technology Development Fund (TDF) Scheme also funds industries, especially – Start-ups and MSMEs upto an amount of Rs. 10 Crore, for innovation, research and development of defence Technologies in the field of defence and Aerospace.

Defence Industrial Corridors

To achieve ‘Aatmanirbharta’ and realise the goal of ‘Make in India’, Government of India has established two Defence Industrial Corridors (DICs) in the country, one in Uttar Pradesh and other in Tamil Nadu. These are expected to attract investments in Aerospace & Defence sector and established a comprehensive defence manufacturing ecosystem in the country. Moreover, the respective State Governments have also published their Aerospace & Defence Policies to attract private players as well as foreign companies including Original Equipment Manufacturers (OEMs) in these two corridors. The two State Governments have already signed MoUs/Agreements with various industries for investment worth total value of about Rs 24,000 crore. Investments worth Rs 2,242 crore and Rs 3,847 crore have been made in Uttar Pradesh Defence Industrial Corridor (UPDIC) and Tamil Nadu Defence Industrial Corridor (TNDIC) respectively.

DPSUs carved out of OFB

The seven new DPSUs carved out of erstwhile Ordnance Factory Board have been incorporated as wholly owned Government companies under the Companies Act 2013 in October 2021. Government has taken steps to initially handhold and support these new defence companies in starting their business as corporate entities. In this regard, outstanding indents with erstwhile OFB were grandfathered and converted into deemed contracts valuing about Rs 70,776 crore for the next five years. These deemed contracts provide annual targets for delivery of products. Every year, 60% of amount pertaining to that year’s target would be paid by the Services to the new DPSUs as advance as per the terms and conditions stipulated in the deemed contract. The advances provide the working capital to the newly constituted DPSUs. With more functional and financial autonomy, these new DPSUs are focusing on widening their customer base, including exports to augment the volume of defence production.

Defence Innovations

An innovation ecosystem for Defence titled Innovations for Defence Excellence (iDEX) was launched in April 2018 to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, Start-ups, Individual Innovators, R&D institutes and Academia. iDEX provides them grants/funding and other support to carry out innovations/R&D which has potential for future adoption for Indian defence and aerospace needs. Under iDEX, 233 problems have been opened, 310 Start-ups have been engaged, 140 contracts have been signed. ‘iDEX Prime’ framework under iDEX has been launched in 2022 to support Start-ups with Grant-in-Aid up to Rs 10 crore to enable the development of high-end solutions.

Till October 2022, a total of 595 Industrial Licences have been issued to 366 companies operating in Defence Sector.

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On the other hand, if the private sector focuses primarily on import substitution through Make in India projects and design & development of advanced munitions, with no assurance of successful outcomes, low or no return on investment (ROI) on huge initial investments will not enthuse the private sector.

Ammunition is procured through both DAP-2020 (Capital) and DPM-2009 (Revenue) routes. Unlike weapon platforms, development of munitions calls for experimentation in the real world, with real weapon systems and platforms, which most private players are unlikely to have. Therefore, the munitions ecosystem has nuanced dynamics and calls for a flexibility in relevant policies and approach.

Armed Forces’ Perspective

The armed forces require advanced, smart, precision-guided, beyond line of sight (BLOS), loitering and intelligent munitions, for land, naval and aerial weapons alike. 

Advanced munitions requirements are centered on autonomous/ man-in-loop munitions, modular and dual band, jam resistant sensors and guidance, dual CCD, cooled and uncooled seekers, pulsed motor/ SFDR/ ramjet propulsion and penetration-cum-blast/blast-fragmentation warheads.

The armed forces are also looking for munitions and payloads for unmanned platforms – anti-personnel, anti-tank, kamikaze, EW, loitering and Swarms. 

For existing inventories the armed forces would like to have range extension and precision guidance kits. 

In particular, the Indian Air Force (IAF) would also like to see indigenisation of electronic fuzes, indigenous immune GPS and ECM/ECCM. In addition, seamless integration of munitions/ missiles with platforms and provision of battle management systems for the munitions was required.

The Navy would also like to see indigenization of underwater systems, missiles, fuzes, torpedos, mines, gun ammunition, counter-drone systems and chaff. 

The Ministry of Home Affairs (MHA) was earlier procuring small arms (SA) ammunition from Ordnance Factory Board (OFB). With creation of Munitions India Ltd (MIL), a corporate entity, procurement, QA/QC and testing policies and procedures need a review. 

Import dependence for ammunition of Tavor Rifles, AMR, AGL, Dragunov Sniper Rifle, UBGL, MGL should be overcome and accorded priority. 

Similarly, indigenous advanced materials and alloys are required and dependence on import should be reduced. 

Atmanirbharta in Munitions

The Indian armed forces exploited precision munitions during the 1999 Kargil War with great effect and during the Balakot Strikes (2019). Thus was felt the inescapable need to develop smart and precision munitions.

There have been policy shifts to enhance the role of private industry and MSMEs to strengthening the ecosystem for munitions. Many barriers like capping of number of bids, criteria for financial eligibility and credit rating have been removed by the Government through considerable relaxations.

In 2016 the Government kick started “Manufacturing of Ammunition for Indian Army by Indian Industry” and issued RFPs in 2017, which were duly amended based on the market response. Four of the 12 projects have reached the trial stage. The three positive indigenisation lists promulgated in the recent past list nearly 50 items of ammunition, including Guided Extended Range Pinaka Rockets, Advanced Light Weight Torpedos, Anti-Radiation Missiles and Loitering Munitions. This reflects the confidence of the Government in R&D and manufacturing prowess of the domestic defence industry.

DRDO-Industry Special Purpose Vehicles (SPV) are allowed to develop essential advanced defence products.

Sixty eight per cent of the capital acquisition budget has been earmarked for the domestic industry in 2022-23 and 25 per cent of the domestic capital procurement budget earmarked for promotion of private industry, MSMEs and start-ups.

The scope of Defence Innovation Start-Up Challenges and Technology Development Fund has been expanded to create more opportunities for them.

Industry Perspective

As compared to the view prevailing about 10-20 years ago, the armed forces have better confidence in private industry and defence PSUs is high on their ability to meet their requirements. This has been substantiated by 11 tenders which were issued for munitions between March 2021 and May 2022, are under the Category of Make in India, spanning a 10-year requirement. 

The armed forces have demonstrated a flexible and pragmatic approach through interactive RFPs.  

The Industry thinks that rate contracts, with agreed variable rates over time, would be more viable for contracts spanning 10 years, as for munitions. 

Make 1 and 2 Categories. Make 1 & 2 are unviable for rockets/ missiles and certain advanced munitions, considering the time and costs involved in the development of the prototypes. Integration kits for aerial munitions carry a high cost of Rs 14 Cr per aircraft, rendering Make 2 unviable.

Another case in point is the timeframe provided for responding to Expression of Interest (EoI) for TGMs for 155mm, where five prototypes were sought in 30 weeks, a product with a CEP of 10 meters, GPS, laser designator, ECM/ ECCM features, all of which required R&D, time and funds. Foreign original equipment manufacturer (FOEM) may not be willing for ToT for Make 2, since a prototype may not result in an order eventually, whereas, for Buy Indian category, even 60% Indian content (IC) may be achievable with a contract in the hands of the Indian Partner. 

FOEMs are likely to exploit the opportunity by partnering with Indian companies, many of which are already exporting items based on competitive advantage in quality and not costs.

Due to peculiar restrictions on FOEMS, ToT and IPR for munitions are more challenging than for other weapons and systems. Moreover, percentages of IC stipulated at 50%-60% are unviable at the prototype stage, and must be lowered. 100 per cent indigenisation was not feasible since the FOEM may not hold IPR for 100 per cent components. In case the material itself was not available in India, it should not be included while determining policy on IC percentage. 

Though 12 RFPs were initiated for procurement of munitions from private industry in 2017, the procedures and outcomes did not inspire much confidence, since there were several amendments issued, only four had reached the trial stage and no order had fructified in five years. Three months timeframe is too short for responding to RFPs for tank/ artillery munitions. 

PPP or SPV models would be more suitable for missiles, rockets and advanced munitions.

Industry feels that even if its products do not meet 100% QRs, a certification stating the extent to which the product met the criterion would help the industry offer the product for exports. 

Though the licensing norms had been opened up and liberalised, not more than 15-20 licenses had been approved for munitions. 

Research & Development

Smart and advanced weapons include components like Inertial Measurement Units (IMU), seekers and Servo actuator motors, which are still imported. The Government needs to provide financial support for design and development.

The Industry feels that transfer of technology (ToT) to the Industry from DRDO is feasible for technologies like thermobaric munitions. For kinetic munitions, where explosives do not play a major role, ToT should be to the OEM for the kinetic component, and not the partner for explosives.

Development cum Production Partner (DcPP) route could result in different types/ models of the same item, creating larger inventories.

Quality Control

Users are concerned about quality, cost, timely delivery and surge capacity. Munitions should be usable and stay stable over a wide temperature range of -40 deg to +50 deg Celsius. The ineffectiveness of thermobaric/blast munitions in high altitude areas could be factored in while framing user requirements. 

Accident occur every four days. Quality is of concern when it comes to propellants, batteries, mines, primers and casings.

Replenishment and life extension of missile systems, which entail testing, refurbishment, safety, servicing and reliability, could be addressed through long term JVs of over 20-30 years. 

Apportioning the process QA/ QC responsibility to the manufacturers is deemed an enabling provision. 

Small Arms/ Mines/ Explosives are stored for decades, and have a long product life. They are safe and life extension procedures are in place. DRDO/ HEMRL/ DGQA and also the industry have set up state-of-the-art facilities for testing and ensuring shelf life in terms of quality and reliability. 

Infrastructure 

Since the shelf life of munitions exceed 10 years, a manufacturer may secure only one to two orders, resulting in production lines remaining idle and unproductive, unless it is utilised for exports. Private Industry should be allowed to partner with MIL/ YIL/ DPSUs for exports. It is financially unviable to harness critical technologies for limited requirements, eg, BMCS for 155mm and four variants of 155mm shells, both spanning 10 years. 

Role of Academia

There is a need for the Services and scientists to study ammunition technologies. IITs have the necessary environment and infrastructure for these studies. MIL has already inked an MoU with the IIT Madras for sponsored M.Tech courses. Collaboration with Academia will ensuring development of reliable products having better design and higher quality standards. 

IIT-M only has policy clearance for research in explosives. This should be extended to other Centres of Excellence/ IITs. It has contributed actively especially in the field of Ramjet Technology for 155mm artillery projectiles. Intelligent munitions are being developed in collaboration with IIT Delhi.

IIT Madras has offered to conduct tailor-made post-graduate programmes for Services as well as DPSUs/MIL/YIL/private industry.

BEL has contributed to the development of 125mm FSAPDS, achieving DOP greater than 530mm.

Recommendations

Flexible Policy Approach. For imported ammunition to be developed by Industry, it is not easy to get to the prototype stage with indigenous content which was feasible with the foreign vendors for weapon systems. For setting up a facility in India with a foreign vendor, FOEM is not likely to agree for providing ToT/ IPR, because ammunition licenses are controlled by foreign Governments. Hence, a flexible approach is necessary for munitions.

Bidding Criteria. Various policies including multiple participation by the bidders, financial eligibility, and issue of credit rating may be relaxed further to incentivise industry participation in defence production. 

Time to Respond to RFP. The time to respond to RFP for tank/ artillery munitions in a three months timeframe is too short. It should be a minimum of 4-6 months. 

Rate Contract. Provision for a Rate Contract for the supply of regular ammunition is recommended. The commercial quotes should remain valid for longer periods. Predictive costing for a period of certain years is not viable due to a large number of intangible attributes in the costing of military goods, therefore, rate contracts provide a viable solution. 

Make II Route. Design, development and R&D for the prototype(s) needs time and financial resources. Though the users now prefer the Make II Route, the private companies find it unviable. Make II cases can be a success story for ammunition manufacturing ecosystem in India, only if the Government provides assurance and monetary incentives, and relaxes the Indigenous content criterion on a case-by-case basis. 

Make II & III Route. Indian firms may manufacture ammunition either in collaboration or with ToT from foreign OEMs. The restrictions of 60 per cent indigenous content (IC) at the prototype stage should be relaxed. 100 per cent indigenisation is not feasible since the FOEM may not hold IPR for 100 per cent components.

DPSU/MIL + 1 Industry Player. The Model of DPSU/ MIL + 1 industry player can be adopted by the Government. Facilitate and stabilise at least two manufacturers (including MIL) for every type of ammunition.

Share Plans with Industry. Industry should be informed about long/ mid-term procurement plans. More transparency and a collaborative environment are required for better outcome delivery. 

Import and Storage of Explosives. It is difficult to store or import ammunition by any private player even if they have an explosive partner. Therefore, private companies and their foreign partners have to depend on Armed Forces for storage, transport and escort. This gives monopoly to DPSUs and a few explosive companies. This needs to be reviewed and redressed. 

Munition Ecosystem. Apart from the MoD/ DDP, the industry needs to proactively engage with the Services to establish and nurture a defence ecosystem that would produce quality, state-of-the-art weapon systems.

Timely Supplies. Once the contract is awarded, timely supply is important and post-sale services must be good. Provisions should be made to ensure that slippages and delays result in automatic activation of penalty clauses to enhance accountability. 

Time Bound Indigenisation. 

Shedding import dependence for ammunition of Tavor Rifles, AMR, AGL, Dragunov Sniper Rifle, UBGL, MGL should be accorded priority. 

Bidding of only 12 items from the three lists of Indigenisation (in revenue route) have been opened. Remainder items (starting from Dec 2021 till Dec 2027) have not been opened for bidding. It takes almost three years after the contract is finalized for the Services to get the ammunition. Regular interaction is required between DDP and Industry/DPSUs/ MIL/ YIL to ascertain which route to take -Make II/Make III by industry, or based on Revenue RFI/ RFP or Make-I.

ToT Provisions. It is recommended that for kinetic munitions, where explosives do not play a major role, ToT should be to the primary OEM for the kinetic component, and not to the partner for explosives. 

Enhancing iDEX and TDF Outcomes. Based on success and experience gained in these innovative approaches, the provisions should be consistently reviewed and refined. 

Incentivisation of Design and Development. To achieve 100 per cent Aatmnirbharta in defence manufacturing, industry needs to foray into niche sectors like the manufacturing of fuzes, seekers, missile engines, etc.

R&D for New Advanced Munitions. Setting up a new design and research organization as an alternative to DRDO, to infuse competition in R&D, is recommended.

New Infrastructure/Capacity  DPSUs/ MIL/ YIL should collaborate with the industry to mutually create and develop new infrastructure, including indigenisation of plants for explosives, to design and develop products. The existing infrastructure for ammunition should optimally be used by diversifying the products. 

Industrial Licence. License for military equipment (including ammunition) is still delayed compared to the expectations. Transparency is required in the grant or denial of licenses.

While the recent policy initiatives of the Government are welcome, the recommendations of the Industry need to be considered by stakeholders in the right earnest for furtherance of Make in India, fostering the growth of the domestic defence industry and ensuring requisite preparedness of the armed forces.

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“The Indian Navy in conjunction with DIO shall be unveiling the problem statements for Indian industries as part of iDEX(SPRINT) during the NIIO seminar ‘Swavlamban 2022’ scheduled on July 18 and 19 at DrAmbedkar International Centre,” said Navy officials. The purpose of the seminar is to engage domestic Industry and academia, commented Navy officials, towards achieving self-reliance in the defence sector. The Navy has accepted the of Atmanirbhar Bharat challenge and reinvested over 64 per cent of its capital budget into the country’s economy.

The NIIO was launched two years ago to realise Defence Acquisition Policy (DAP 2020) objectives which envisage creation of ‘Innovation and Indigenisation Organisations (IIOs)’ within service headquarters (SHQs).

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In a major push towards ‘Aatmanirbharta’ in defence sector, the defence ministry accorded in-principle approval to fund four projects by Indian industry. It includes design and development of light tank for the Indian Army and airborne stand-off jammer for the Indian Air Force. The industry will be provided financial support for prototype development of these projects.

Defence ministry has offered these four projects (one for army and three for IAF) to the Indian Industry for design and development under Make-I category of Defence Acquisition Procedure (DAP) 2020.

This is for the first time since the launch of industry-friendly DAP-2020 that Indian industry has been involved in development of big ticket platforms such as Light tank and Communication Equipment with Indian security protocols.

Three  projects for Indian Air were accorded ‘Approval In-Principle (AIP)’ by Collegiate Committee of MoD including communication equipment with Indian security protocols (routers, switches, encryptors, VoIP phones and their software) and Airborne Electro Optical pod with Ground Based System.

“The indigenous development of these projects in the country will help harness the design capabilities of Indian defence industry and position India as a design leader in these technologies,” said defence ministry.

In the defence budget, 70 per cent funds have been kept for domestic procurement in 2022-23. Underlying the importance of Make-in-India in defence sector, Prime Minister Narendra Modi had told Indian industry that surprise element during war can only be attained if customized and unique weapons are developed in one’s own country.

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On 28 September, 2020 defence minister Rajnath Singh unveiled the Defence Acquisition Procedure (DAP) – 2020 in New Delhi. DAP 2020 has been aligned with the vision of the Government of Atmanirbhar Bharat to empower Indian domestic industry through Make in India initiative with the ultimate aim of turning India into a global manufacturing hub.

The first Defence Procurement Procedure (DPP) was promulgated in the year 2002 and has since been revised periodically to provide impetus to the growing domestic industry and achieve enhanced self-reliance in defence manufacturing.

With the new Foreign Direct Investment (FDI) policy announced, DAP 2020 has adequately included provisions to encourage FDI to establish manufacturing hubs both for import substitution and exports while protecting interests of Indian domestic industry. DAP 2020 focuses on simplifying the defence acquisition procedure and institutionalising monitoring mechanism with concurrent actions using digital technologies & data base for selection of best equipment in a transparent and competitive manner giving adequate opportunities to capable vendors.

ALSO READ: Draft Defence Production and Export Promotion Policy 2020

Make in India initiative of the Government of India focuses on increasing participation of Indian Vendors including MSMEs, and therefore “Make” procedure has been further refined in DAP 2020 to make it more objective and time bound with focus on Indian industry especially MSMEs. The new DAP has 12 chapters instead of 8 chapters as per DPP 2016. There are new chapters on: 

•             Acquisition of Systems Products and ICT Systems: Acquisition of Systems and Information & Communication Technology (ICT) products is in a few aspects different from the regular acquisition projects.  The software and hardware elements of these projects usually require periodic up-gradations and intense obsolescence management to maintain tactical dominance in C4I2, EW and Cyber domain.   To provide an efficient and agile acquisition mechanism for acquisition and up-gradation of such products, certain provisions are incorporated in this Chapter, to be read in conjunction with relevant provisions of Chapter-II of Defence Acquisition Procedure.

•             Leasing: Concept of Leasing has been introduced to substitute capital expenses with small rental payments for defence equipment not directly involved in warfighting.

•             Other Capital Procurement Procedure: This chapter would lay out procedure on other capital expenses such as: overhauls, refits, upgrades and replacement of items of Capital nature. The procurement under this chapter will be as per list of items (as amended from time to time), which will be drawn up by HQ IDS and respective SHQs and promulgated by DG (Acquisition) in consultation with MoD (Finance).

•             Post Contract Management: This involves ensuring compliance with the terms and conditions of contract, managing contractual amendments, quality assurance, timely payment and deliveries, and resolving claims and disputes.

In the categories of procurement, the categories of Buy(Indian-IDDM), Make I, Make II, Production Agency in Design &Development, OFB/DPSU and SP model will be exclusively reserved for Indian Vendors meeting the criteria of Ownership and Control by resident Indian Citizens with FDI not more than 49%. This reservation will provide exclusivity in participation to domestic Indian industry. Impetus has been given towards developing indigenous defence industry by increasing IC percentages (%) in categories of procurement. The revised IC percentages are as follows:

Project Management Unit

One of the important announcements as part of the Defence Reforms announced in the Atmanirbhar Abhiyan, setting up of a PMU has been mandated to support contract management. The PMU will facilitate obtaining advisory and consultancy support in specified areas to streamline Acquisition process. The PMU will also support in setting up realistic GSQRs and simplification of trial procedures.

Another key focus areas of the review was to implement Ease of Doing Business. with emphasis on simplification, delegation and making the process industry friendly with certain specific provisions incorporated:-

•             Procedural Changes: Single stage accord of AoN in all cases upto Rs 500 crores has been instituted thereby reducing time. FTP cases, post accord of AoN, will be progressed as per delegated powers thereby reducing the procurement cycle considerably. In Planning Process, LTIPP has been re-designated as Integrated Capability Development Plan (ICDP) covering planning period of ten years instead of 15 years.

ALSO READ: Reforms in Defence Procurement Announced

•             Request for Proposal (RFP) and Standard Contract Document (SCD): Certain measures to provide clarity and alignment of requirements as also enabling provisions have been incorporated in the RFP and SCD in terms of Flow Chart drivenguidelines, provision of in-storage preservation and termination of contracts in cases where projects are not progressing as per pre–defined milestones.

A separate dedicated chapter has been incorporated in the DAP 2020 for acquisition of systems Designed and Developed by DRDO/DPSUs/OFB. A simplified procedure with Integrated Single Stage Trials to reduce timelines and laying greater emphasis on evaluation through certification and simulation. Aspects of Spiral Development have been incorporated.

The Government of India.s new DAP 2020 document will certainly instil a confidence and will meet aspirations of stakeholders across the spectrum.

Comments

Defence Acquisition Procedure is based on the concept of “Womb to “Tomb” and has certain unique aspects such as supplier constraints, technological complexity, foreign suppliers, high cost, foreign exchange implications and geo-political ramifications, and therefore is not a standard open market commercial form of procurement. While maintaining highest standards of transparency, probity and public accountability, a balance between competing requirements such as expeditious procurement, high quality standards and appropriate costs needs to be established. As a result, decision making pertaining to defence acquisition remains distinctive and complex.

Atmanirbhar Bharat initiative, further accentuated by policy reforms in the defence sector as part of Phase IV ‘New Horizons of Growth’ is focussed towards enhancing self-reliance in defence production, indigenisation of spares, overhauling of trial and testing procedures based on realistic Services Qualitative Requirements (SQR) and requisite monitoring by Project Management Unit (PMU) for time bound procurement. There is a need to institute enabling provisions for utilisation and consolidation of design, development and manufacturing infrastructure available in the country. A need has also been felt, for identifying strategic partners for promoting defence production in the private sector. The FDI policy statement of enhancing FDI through automatic route from 49% to 74% in defence should enable ‘Manufacture in India’ a lucrative option for foreign equipment manufacturers.

Make in India initiative of the Government of India focuses on increasing participation of Indian Vendors including MSMEs, and therefore “Make” procedure has been further refined in DAP 2020 to make it more objective and time bound with focus on Indian industry especially MSMEs. Cutting down permissible timeframes for various activities and institutionalising robust mechanisms to monitor for probity at various stages of the acquisition process are the attributes of this DAP.

While the Defence Acquisition involves long gestation periods, where as the needs of the Armed Forces being non negotiable, flexibility in the procedure has been provisioned for, to ensure timely availability of important equipment. But the proof of the pudding will be in the eating.

DAP 2020 may be a product of extensive analysis, deliberations, interactions and focused formulations, to further ‘Self Reliance’ of the country in the defence sector and implement ‘Ease of Doing Business’ with emphasis on simplification, delegation, reduced timelines and making the process as industry friendly as possible, but again, mindsets also need to change.

Category              DPP 2016             DAP 2020
Buy (Indian-IDDM)          Min 40%               Min 50% 
Buy (Indian)       Min 40%               Indigenous design – Min 50%
                                Otherwise – Min 60%
Buy & Make (Indian)      Min 50% of Make         Min 50% of Make  
Buy(Global- Manufacture in India)           –         Min 50% of Buy plus Make
Buy (Global)       Min 30% for Ind vendors   Min 30% for  Indian vendors

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