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Defence Acquisition Procedure

  • IAS NEXT, Lucknow
  • 05, Mar 2022
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In a renewed push for self-reliance in the defence sector, the government has given in-principle approval to a raft of indigenous defence projects that will involve design and development by the industry.

The defence ministry has cleared nine such projects: four under the ‘Make-I’ and five under the ‘Make-2’ categories of the Defence Acquisition Procedure 2020.

  • The approved projects include development of light tanks, communication equipment with Indian security protocols, airborne electro-optical pod with ground-based system and airborne stand-off jammers.

DAP 2020:

  • The new policy superseded the Defence Procurement Procedure of 2016 from October 1.
  • The DAP contains policies and procedures for procurement and acquisition from the capital budget of the MoD in order to modernise the Armed Forces including the Coast Guard.

Highlights of the new policy:

  1. Reservations for Indigenous firms:
  2. The policy reserves several procurement categories for indigenous firms.
  3. DAP 2020 defines an “Indian vendor” as a company that is owned and controlled by resident Indian citizens, with foreign direct investment (FDI) not more than 49 per cent.
  4. New Buy (Global–Manufacture in India) category:

This stipulates indigenisation of at least 50 per cent of the overall contract value of a foreign purchase bought with the intention of subsequently building it in India with technology transfer.

  1. Greater indigenous content:

It promotes greater indigenous content in arms and equipment of the military procures, including equipment manufactured in India under licence. In most acquisition categories, DAP-2020 stipulates 10 per cent higher indigenisation than DPP 2016.

  1. Import embargo list:

The “import embargo list” of 101 items that the government promulgated last month has been specifically incorporated into DAP 2020. (An embargo is a government order that restricts commerce with a specified country or the exchange of specific goods.)

  1. Offset liability:

The government has decided not to have an offset clause in procurement of defence equipment if the deal is done through inter-government agreement (IGA), government-to-government or an ab initio single vendor.

  • The offset clause requires a foreign vendor to invest a part of the contract value in India.