Page 2 - Digi Notes - English -14 April
P. 2
www.mahendraguru.com
ARTICLE 1 -
The Defence Procurement Policy 2016 made public this week is a step
forward in increasing the participation of India’s private sector in military
manufacturing. It replaces the last DPP unveiled in 2013, and has several
recommendations for improving indigenous procurement. The DPP, the
governing manual for all defence procurement, was part of a set of military
reforms undertaken to address the many deficiencies noticed during the 1999
Kargil war. Since the first one in 2002, the DPP has been revised
periodically. The new policy places the highest preference to a newly
incorporated procurement class called ‘Buy Indian-IDDM’, with IDDM
denoting Indigenous Designed Developed and Manufactured. This category
refers to procurement from an Indian vendor, products that are indigenously
designed, developed and manufactured with a minimum of 40 per cent local
content, or products having 60 per cent indigenous content if not designed
and developed within the country. The policy has also liberalized the
threshold for offset liabilities for foreign vendors — now the obligation to
invest at least 30 per cent of the contract value in India will kick in at
Rs.2,000 Crores, a significant increase from the previous Rs.300-crore mark.
The policy lays stress on micro, small and medium enterprises (MSMEs),
and on “Make in India”. A 10 per cent weightage has been introduced for
superior technology, instead of selecting the lowest bidder only in financial
terms.
DPP 2016, however, falls far short of the expectations raised by the Narendra
Modi government’s ambitious “Make in India” push that aims to transform
the country into a global manufacturing hub. India is the world’s largest
importer of defence equipment, and indigenizing production is key to such a
plan. The DPP is noticeable for the absence of Chapter VII, titled ‘Strategic
Partners and Partnerships’, which the Defence Minister said would be
notified separately. Under Strategic Partnerships, select Indian private
companies were to be given preferential status in major defence projects. The
inability of the Centre to finalize a credible policy to radically increase
indigenous military manufacturing is a sure sign that India will remain
heavily dependent on defence imports. Given the country’s robust financial
growth, one of its greatest leveraging points is the annual spend on
procurement. India has all the necessary prerequisites for a robust military-
www.mahendraguru.com
ARTICLE 1 -
The Defence Procurement Policy 2016 made public this week is a step
forward in increasing the participation of India’s private sector in military
manufacturing. It replaces the last DPP unveiled in 2013, and has several
recommendations for improving indigenous procurement. The DPP, the
governing manual for all defence procurement, was part of a set of military
reforms undertaken to address the many deficiencies noticed during the 1999
Kargil war. Since the first one in 2002, the DPP has been revised
periodically. The new policy places the highest preference to a newly
incorporated procurement class called ‘Buy Indian-IDDM’, with IDDM
denoting Indigenous Designed Developed and Manufactured. This category
refers to procurement from an Indian vendor, products that are indigenously
designed, developed and manufactured with a minimum of 40 per cent local
content, or products having 60 per cent indigenous content if not designed
and developed within the country. The policy has also liberalized the
threshold for offset liabilities for foreign vendors — now the obligation to
invest at least 30 per cent of the contract value in India will kick in at
Rs.2,000 Crores, a significant increase from the previous Rs.300-crore mark.
The policy lays stress on micro, small and medium enterprises (MSMEs),
and on “Make in India”. A 10 per cent weightage has been introduced for
superior technology, instead of selecting the lowest bidder only in financial
terms.
DPP 2016, however, falls far short of the expectations raised by the Narendra
Modi government’s ambitious “Make in India” push that aims to transform
the country into a global manufacturing hub. India is the world’s largest
importer of defence equipment, and indigenizing production is key to such a
plan. The DPP is noticeable for the absence of Chapter VII, titled ‘Strategic
Partners and Partnerships’, which the Defence Minister said would be
notified separately. Under Strategic Partnerships, select Indian private
companies were to be given preferential status in major defence projects. The
inability of the Centre to finalize a credible policy to radically increase
indigenous military manufacturing is a sure sign that India will remain
heavily dependent on defence imports. Given the country’s robust financial
growth, one of its greatest leveraging points is the annual spend on
procurement. India has all the necessary prerequisites for a robust military-
www.mahendraguru.com
