Defence Acquisition procedure-2020 Of Ministry of Defence

• Ministry of Defence unveiled the Defence Acquisition Procedure (DAP)-2020 on 28th September, 2020. DAP-2020 has been aligned with the vision of the Government’s Atma Nirbhar 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.

• Some of the specific reforms enunciated in AtmaNirbhar Bharat Abhiyan, are as under:

a) Notify a List of Weapons/Platforms for Ban on Import: Relevant incorporation has been done in the DAP to ensure that NO equipment as mentioned in the list is procured ex import post timelines notified.

b) Indigenization of Imported Spares:

i. Request for Information (RFI)- RFI stage will explore willingness of the prospective foreign vendors to progressively undertake manufacture and set up and indigenous eco system at the spares/ sub component level.

ii. New Category of Buy (Global- Manufacture in India)- The new category incorporates manufacture of either the entire/part of the equipment or spares/ assemblies/sub-assemblies/Maintenance, Repair and Overhaul (MRO) facility for the equipment, through its subsidiary in India.

iii. Co-production through IGA (Inter Government Agreement)- This enables establishment of co-production facilities through IGA achieving ‘Import Substitution’ and reduce Life Cycle Cost.

iv Contractual Enablement.. Buyer’s Right to optimize Life Cycle Support costs and system enhancements through indigenous eco system incorporated.

c) FDI in Defence Manufacturing: With the announcement of new FDI Policy, suitable provisions have been incorporated like new category ‘Buy (Global – Manufacture in India)’ done to encourage foreign OEMs to setup ‘manufacturing/ maintenance entities’ through its subsidiary in India while enabling requisite protections to domestic industry.

d) Time Bound Defence Procurement Process and Faster Decision Making: As part of the Defence Reforms announced in Atma Nirbhar Abhiyan, setting up of a PMU has been mandated to support contract management. The PMU will facilitate obtaining advisory and consultancy support in specified areas to streamline Acquisition process.

• Ease of Doing Business: One of the key focus areas of the review was to implement ‘Ease of Doing Business’ with emphasis on simplification, delegation and making the process industry friendly with certain specific provisions like Single stage accord of AoN in all cases up to ` 500 crore to reduce time. • Make and Innovation: a) Make I (Government Funded up to 70%)- Laying down a cap of ` 250 crore /DA and selection of DAs based on bidding criteria.

b) Make II (Industry Funded) for production of indigenously designed & developed weapons/equipment/systems/platforms along with sub components/assemblies.

c) Make III (Indigenously Manufactured) category for manufacture of equipment/ platforms or spares/assemblies/sub-assemblies for enabling import substitution.

d) Procurement of prototypes developed through ‘Innovation’ under various initiatives like iDEX, Technology Development Fund and Internal Services Organisations has been facilitated.

• Offsets: The Offset guidelines have been revised, wherein preference will be given to manufacture of complete defence products over components and various multipliers have been added to give incentivisation in discharge of Offsets.

Self- Reliance in Defence Production: To achieve self-reliance in the defence sector and make India a global hub in defence manufacturing the Ordnance Factories (OFs), Defence Public Sector Undertakings (DPSUs) and the private industry ecosystem have enhanced their capabilities and widened the product range. A large number of major products have been developed through R&D initiatives and through transfer of technology. As a policy, DPSUs and OFs have been outsourcing many of their requirement, the value of outsourcing in terms of value of production for the FY 2019-20 stands at 41.70%. Further over the years a wide vendor base has been developed that includes a large number of medium and small scale enterprises and large scale industries. In addition, the DPSUs and OFs are also striving to increase the indigenous content in the equipment’s and products manufactured by them. The indigenous content (Degree of Indigenization) as on 31.03.2020 was 74.56%
Policy Initiative Under the latest Preference to Public Procurement (Make in India) Order 2017, -Department of Defence Production has notified list of 46 items for which there is sufficient local capacity and competition and thus, the procurement of these items shall be done only from local suppliers, irrespective of the purchase value The innovation ecosystem for Defence tilted “Innovation for Defence Excellence” (iDEX), launched in 2018, intends to engage industries including MSMEs, Start-ups, Individual Innovators, R&D institutes and Academia and provide them grants/funding and other support to carry out R&D, which has potential for future adoption for Indian defence and aerospace needs. Defence Investor Cell functional since January 2018 under DDP is playing a pivotal role of facilitator and guide to Defence entrepreneurs regarding their queries/grievances. It has addressed more than 1000 such queries/cases from across the country. Private sector Participation In May 2001, the Defence Industry sector, which was hitherto reserved for the public sector, was opened up to 100 per cent for Indian private sector participation with Foreign Direct Investment (FDI) up to 26 per cent, both subject to licensing. FDI policy was further liberalized vide Press Note no. 4(2020 Series) dated 17.09.2020 and FDI has been allowed under automatic route up to 74% and above 74% through government route wherever it is likely to result in access to modern technology or for other reasons to be recorded. Foreign Investments in the Defence Sector shall be subject to scrutiny on grounds of Nations Security and Government reserves the right to review any foreign investment in the Defence Sector that affects or may affect national security. After opening of the Defence Industry Sector for private sector participation, so far 44 FDI proposals/Joint Ventures have been approved in defence sector for manufacture of various defence equipment, both in public and private sectors. DPIIT has issued 496 Industrial Licenses (ILs) to private companies till September 2020 for manufacture of a wide range of defence items.
Export Promotion- Exports from Ordnance Factory Board (OFB), DPSUs and the private sector (based on authorization issued by DDP) in the Financial Year have increased from ` 4,682 crore in FY2017-18 to ` 9116 crore in FY2019-20. In order to encourage participation of private sector in indigenous design, development and manufacture of Defence equipment, 'Make' Procedure has been further simplified and incorporated as Chapter-III of Defence Acquisition Procedure 2020 w.e.f 01.10.2020. Apart from "Make-I & Make-II' categories, a new category 'Make-III' has been introduced with an objective to get the defence items already in the inventory of Service, manufactured in the country even if the design & development is not carried out in India. Framework for implementation on 'Make-II' procedure at Ordnance Factories and Defence PSUs was also issued in February 2019 enabling them to take up indigenisation of the items, particularly of import substitution nature, through Indian private industry.

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