DAC Approved Major Changes in DPP to Encourage Indian Defence Industry

Apr 20, 2013 16:10 IST

The Defence Acquisition Council (DAC), the apex decision making body of the MoD, took a series of decisions on 20 April 2013, including amendments to Defence Procurement Procedure (DPP) with the objective of infusing greater efficiency in the procurement process and strengthening the defence manufacturing base in India.

Following are the highlights of the amendments to the DPP-2011:
1.Prioritisation of Various Categories for Capital Acquisitions under Defence Procurement Procedure
Preference for indigenous procurement in the Defence Production Policy 2011 has now been made a part of DPP through an amendment that provides for a preferred order of categorisation, with global cases being a choice of last resort.

2.Release of Public Version of Long Term Integrated Perspective Plan (LTIPP)
The DAC has approved the release of a public version of its 15-year perspective document (LTIPP), outlining the “Technology Perspective and Capability Roadmap” (TPCR) against LTIPP 2012-2027. The TPCR will provide useful guidance to the Indian Defence Industry for boosting its infrastructural capabilities and directing its R&D and technology investments.

3.Maintenance ToT (MToT) no longer through Nomination
MToT has been hitherto reserved largely for OFB and DPSUs through the nomination process. A DPP amendment has been approved that does away with nomination by Department of Defence Production and facilitates selection of MToT partners by Indian bidders. This measure is expected to have a positive impact on private sector participation in maintenance, repairs and overhaul work.

4.Simplification of Buy & Make (Indian) Procedure
The DAC has approved an amendment further simplifying this complex category. Its procedures have been brought on par with other categorisations, resulting in faster processing of cases under this category.

5.Clear Definition of Indigenous Content
Increased indigenisation is important for our Armed Forces, in order that they have access to reliable supply chains in times of urgent need. Indigenous content has now been defined in an unambiguous manner, providing requisite clarity and a common understanding.

6.Ensuring faster progress in Make and Buy & Make (Indian) cases
The Ministry has a limited number of acquisition cases under Make and Buy & Make (Indian) categories, with an estimated value of 120000 crore rupees. Instructions have been issued for speedier conclusion of these cases.

7.  Defence Items List
Indian defence industry was opened up in May 2001 for 100 percent private sector participation subject to licensing. The Defence Items List has been finalised by the Ministry and sent to DIPP for notification, which will bring required clarity in the licensing process.

8. Licensing for Dual Use Items
The Ministry has categorically clarified to DIPP that dual-use items will not require licensing, thereby bringing added clarity to the licensing process.

9. Consultations on Security Guidelines for Indian Defence Industry
Draft Security Guidelines that will apply to all licensed defence industries have been circulated for consultations with various stakeholders. It is expected that a complete security framework for Indian private industries participating in defence cases will be in place in the near future.

10. Resolution of Tax-related Issues
Resolution of deemed exports status for certain defence projects and rationalisation of tax and duty structures impinging on the Indian defence industry has been taken up by the MoD with the Ministry of Finance.

11. Funds for MSMEs in the Defence Sector
The Defence Production Policy 2011 requires the setting-up of a fund to provide necessary resources for development of defence equipment. In order to ensure regular supply of funds to MSMEs involved in manufacturing of defence products, SIDBI has decided to earmark an amount of 500 crore rupees for providing loans, and further, a fund of  50 crore rupees for equity support out of India Opportunities Fund managed by its subsidiary, namely, SIDBI Venture Capital Ltd.

12. Efficiency and Transparency in Defence Procurement

A stipulation to freeze the SQRs before the Acceptance of Necessity (AoN) stage has been accorded, and the validity of AoN has also been reduced from two years to one year. These measures are expected to expedite the acquisition process and increase transparency.

13. Enhanced Delegation of Financial Powers
The financial powers of Service Chiefs/ DG Coast Guard have been enhanced from 50 crore rupees to 150 crore rupees for capital acquisition cases.

14. Powers to DAC
Approval for all deviations from the Defence Procurement Procedure will henceforth be sought from the Defence Acquisition Council instead of the Defence Minister.

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