From UPSC perspective, the following things are important :
Prelims level : Defence Procurement Procedure
Mains level : Defence procurement in India
Raksha Mantri unveiled the draft Defence Procurement Procedure (DPP) 2020 that aims at further increasing indigenous manufacturing and reducing timelines for procurement of defence equipment.
Defence Procurement Procedure
- The draft of DPP 2020 has been prepared by a Review Committee headed by Director General (Acquisition) based on the recommendations of all stakeholders, including private industry.
- The first DPP was promulgated in 2002 and has since been revised a number of times to provide impetus to the growing domestic industry and achieve enhanced self-reliance in defence manufacturing.
- The government is constantly striving to formulate policies to empower the private industry including MSMEs in order to develop the eco-system for indigenous defence production.
- The major changes proposed in the new DPP are:
1) Indigenous Content ratio hiked
- The draft proposes increasing the Indigenous Content (IC) stipulated in various categories of procurement by about 10% to support the ‘Make in India’ initiative.
- A simple and realistic methodology has been incorporated for verification of indigenous content for the first time.
2) New Category: “Buy Global” Manufacture in India
- It has been introduced with minimum 50% indigenous content on cost basis of total contract value.
- Only the minimum necessary will be bought from abroad while the balance quantities will be manufactured in India.
- This would be in preference to the ‘Buy Global’ category as manufacturing will happen in India and jobs will be created in the country.
3) Leasing introduced as a new category
- Leasing has been introduced as a new category for acquisition in addition to existing ‘Buy’ & ‘Make’ categories to substitute huge initial capital outlays with periodical rental payments.
- Leasing is permitted under two categories e, Lease (Indian) where Lessor is an Indian entity and is the owner of the assets and Lease (Global) where Lessor is a Global entity.
- This will be useful for military equipment not used in actual warfare like transport fleets, trainers, simulators, etc.
4) Product support
- The scope and options for Product Support have been widened to include contemporary concepts in vogue, namely Performance Based Logistics (PBL), Life Cycle Support Contract (LCSC), Comprehensive Maintenance Contract (CMC), etc to optimize life cycle support for equipment.
- The capital acquisition contract would normally also include support for five years beyond the warranty period.