Defence ministry out with new draft procurement policy

Unveiling the draft, Defence Minister Rajnath Singh said, “Our aim is to make India self-reliant and a global manufacturing hub. The government is constantly striving to formulate policies to empower the private industry including MSMEs in order to develop the eco-system for indigenous defence production.”

“The defence industry of India is a strategically important sector having huge potential for growth. It needs to be the catalyst for India’s economic growth and realisation of our global ambitions,” he added.

“With the experience gained by the industry and the Ministry of Defence, it is now time to take further steps to strengthen ‘Make in India’ initiative, refine life cycle support of procured equipment and platforms and hasten the defence acquisition process by further simplifying the procedures & reducing the overall procurement timelines,” Rajnath said.

The Draft Defence Procurement Procedure 2020 will increase the indigenous content for various categories of equipment by 10 per cent. It has also introduced a new category of Buy Global-Manufacture in India, under which a minimum of 50 per cent indigenous content on cost basis of total contract value will be necessary. The Defence Ministry said that “only the minimum necessary will be bought from abroad while the balance quantities will be manufactured in India” and manufacturing will happen in India.

It will also have a ‘price variation clause’ for any project worth Rs 1,000 crore or more, with a delivery schedule of 60 months or more “to cater for the escalation of price from the last date of submission of bids till the finalisation” of the negotiations.

The leasing model, included for the first time, will help substitute huge initial capital outlays with periodical rental payments and will be useful for equipment like transport fleets, trainers etc that are not used in warfare. The Lessor could be Indian of a global entity, the draft said.

Another chapter in the draft is for procurement of software and systems-related projects because in projects like these “obsolescence is very fast due to rapid changes in technology and flexibility in the procurement process is required to keep up with the technology”.

The other significant addition is the Post Contract Management, which will provide clear guidelines for issues arising during the contract period as typically defence contracts last for a long period. The capital acquisition contract will also include support for five years beyond the warranty period.

A high-level review committee headed by DG Acquisition and created in August 2019 had recommended these changes based on the recommendations of stakeholders, including from the private industry. The ministry has uploaded the draft, seeking further suggestions within April 17.