Defence Procurement Policy (DPP) 2016

The duly- awaited Defence Procurement Policy (DPP) 2016 was released online in time for the Defence Expo inauguration in Goa. In DPP-2016, a new category for acquisition—Indigenously Designed Developed and Manufactured (IDDM) – has been introduced by the Ministry of Defence. Under this category a condition has been put that the proposed indigenously designed, developed and manufactured equipment must possess at least 60%  locally sourced components of the total of the same. It further states that if the design is not Indian, the ratio of the locally sourced components would be 40%.

The new DP was finalised on March, 21 during a meeting of the Defence Acquisition Council (DAC) . The meeting was chaired by the defence minister of India.

Benefits of IDDM Category

The Ministry of Defence has claimed that the IDDM category is going to be the most preferred acquisition category. The IDDM and Buy and  Make in India categories are going to assist global OEMs and Indian companies in coining partnership for co – production and co – development. Since the revised policy is going to give prominence to those defence firms that are operating in the MSME section, the government- funded defence projects is going to be reserved for MSMEs. However, the estimated development cost of these projects will be less than Rs 10 crore.

The offset – level, under Defence Procurement Policy 2016, has been increased to Rs 2000 crore from the current level of Rs 300 crore. This development has occurred because the central government believes that the Indian industry is not in a position to engross large – scale offsets.

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Blacklisting Defence Procurement Policy

There are two types of “ punishment” the revised policy has put  forward in terms of temporary suspension and permanent blacklisting along with a heavy penalty, However, the Ministry jas made it clear that there will be no relaxation for the already blacklisted defence firms . Moreover, companies can approach the committee with their grievances and hope for a lesser punishment under the new blacklisting policy.

Peace Time Procurement

The new policy, even during the peace time, has decided to fast – track the defence purchases. Prior to this, the fast – track mechanism could be availed only during wartime, when the forces required a particular category of equipment urgently.

A committee of defence has been empowered to handle the fast – track decisions .This committee has also  been empowered  to select a specific partner for particular equipment with proven results that will entirely depend on the requirement.

Disinvestment in Defence Procurement Policy

The defence minister, ruling out disinvestment in the defence public sector undertakings, asserted that there were certain areas where the role of these institutions could not be allowed to be taken over by private players.

The requirement of defence forces urges the force to make capabilities for certain products that may not be required on the regular basis by them. According to the Minister this expertise,  that is built up, cannot be left to private sector because it includes costs.

A certain kind of ammunition may be needed once in three years for which the Ordnance Factories Board (OFB) has to retain the capability, technology and manpower without putting these to use on a regular basis. So it becomes necessary to retain the Ordnance Factories and defence PSUs for certain products. And no one can refute the fact that  only the government  has got the capacity to afford to sustain such capabilities that have been created for a number of years for future needs.

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