DPP,2016
1 ANSWER
Aditya Ramula, Indian by Heart.
The Defence Procurement Policy 2016 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 liberalised 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 crore, 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 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 indigenising 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 finalise a credible policy to radically increase indigenous military manufacturing is a sure sign that India will remain heavily dependent on defence imports.
Source: Towards military self-reliance
More:(PDF File) DPP-2016 by Ministry of Defence, Government of India
UPDATE:
Summary of DPP 2016:
The Ministry of Defence released five (out of seven) chapters of the Defence Procurement Procedure (DPP), 2016 on March 28, 2016. The chapters that have been released lay down the process for capital acquisitions undertaken by the Ministry of Defence, the Armed Forces,and the Indian Coast Guard, whether from indigenous sources or import. The chapters of the DPP, 2016 that have not been released pertain to guidelines covering standard defence contracts, and choosing strategic partners in the private sector.The DPP, 2016 will replace the DPP, 2013(currently in force), and will come into effect from April 1, 2016.Categories of acquisition: DPP, 2013 provides five routes for capital acquisitions.24 These are preferred in the following order:
(i) ‘Buy(Indian)’ meaning purchase of equipment from Indian vendors (with minimum 30% indigenous content), (ii) ‘Buy and Make (Indian)’ meaning purchase from Indian vendors followed by licensed production in India (with minimum 50% indigenous content), (iii) ‘Make’ meaning indigenous development and manufacture (with minimum 30% indigenous content), (iv)‘Buy and Make’ meaning purchase from foreign vendor followed by licensed production in India,and (v) ‘Buy (Global)’ meaning purchase from foreign or Indian vendors.
The DPP 2016 has added one more category,‘Buy (Indian- Indigenously Designed,Developed and Manufactured)’, as the most preferred route of capital acquisition. This means, purchasing from an Indian vendor,products that have either: (i) been indigenously designed, developed and manufactured with minimum 40% indigenous content, or (ii) not been indigenously designed or developed but have at least 60% indigenous content.Further, the DPP, 2016 has increased: (i) the indigenous content requirement under Buy(Indian) from 30% to 40% of contract value, and(ii) the government assistance provided to the defence industry under the Make category.
Offset obligation: Offset obligation is applicable to acquisitions under some categories which provide a greater role to foreign production (eg. Buy (Global)). It requires the vendor to re-invest 30% of the defence contract value in the Indian defence sector. The DPP,2013 makes this obligation applicable to vendors of defence contracts above Rs 300 crore. The DPP, 2016 modifies this to Rs 2,000 crore..
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