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Current Affairs Brain Booster for UPSC & State PCS Examination

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Topic: New Defence Procurement Procedure - 2020

Why in News?

• Union Defence Minister Rajnath Singh has unveiled the Defence Acquisition Procedure (DAP) – 2020 in New Delhi on 28th September 2020.

Policy Focus

• 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.
• DAP 2020 has been aligned with the vision 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.
• 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.
• The DAP 2020 will eventually replace the existing Defence Procurement Procedure (DPP) 2016.

Main Features of DAP 2020

• Time-bound defence procurement process and faster decision making. A Project Management Unit (PMU) has been mandated to support contract management. It will facilitate obtaining advisory and consultancy support in specified areas to streamline the acquisition process.
• Request for Information (RFI) stage will explore the willingness of the prospective foreign vendors to progressively undertake the manufacture and set up an indigenous ecosystem at the spares/sub-component level.
• Co-production through Intergovernmental Agreements (IGAs). This enables the establishment of co-production facilities through IGA achieving import substitution and reducing life cycle cost.
• Simplification of Trial Procedures: Emphasis on the need to conduct trials to nurture competition based on the principles of transparency, fairness, and equal opportunities to all and not as a process of elimination.
• A separate dedicated chapter has been incorporated in the DAP 2020 for the acquisition of systems designed and developed by DRDO/DPSUs/OFB. A simplified procedure with Integrated Single Stage Trials to reduce timelines and lay greater emphasis on evaluation through certification and simulation.
• The new category incorporates manufacture of either the entire/part of the equipment or spares/assemblies/subassemblies/Maintenance, Repair and Overhaul (MRO) facility for the equipment, through its subsidiary in India.
• Only 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%. ( Hence, JVs created by foreign OEMs in India with more than 49% FDI in the defence sector will be eligible to participate in RFPs issued under ‘Buy(Indian)’ and “Buy & Make (Indian) categories, besides the new category of Buy (Global- Manufacture in India).

Offsets Clause Removed

• New Defence Acquisition Procedure removes the clause for offsets for certain kinds of defence contracts.
• The offset is an obligation by an international player to boost India’s domestic defence industry if India is buying defence equipment from it.
• The Comptroller and Auditor General (CAG), in a report submitted on September 23, defined offsets as a “mechanism generally established with the triple objectives of: (a) partially compensating for a significant outflow of a buyer country’s resources in a large purchase of foreign goods (b) facilitating induction of technology and (c) adding capacities and capabilities of domestic industry”.
• Only government-to-government agreements (G2G), ab initio single vendor contracts or inter-governmental agreements (IGA) will not have offset clauses anymore. For example, the deal to buy 36 Rafale fighter jets, signed between the Indian and French governments in 2016, was an IGA.
• According to DAP 2020, all other international deals that are competitive, and have multiple vendors vying for it, will continue to have a 30% offset claus.