Government unveils draft procurement procedure for defence products

"Leasing" as a category to get defence equipment at affordable rates was launched


The government issued the draft Defence Procurement Procedure (DPP) 2020 on Friday, wherein it introduced "leasing" as another category to get defence equipment at affordable rates.

Moreover, the indigenous content stipulated in various categories of procurement was enhanced to support the "Make in India" initiative, a statement issued by the government said.

For example, under the "Buy (Indian-IDDM)" category of the new DPP, only Indian products— designed in-house, developed and manufactured with a minimum of 50 per cent indigenous content of the total contract value — of an Indian vendor would be classified.

This category, which gets the highest priority during defence procurement, till now had products with 40 per cent or more indigenous content, according to the DPP 2016.

In the new DPP, a new category of "Buy (Global-Manufacture in India)" has been introduced, which is on number five priority-wise.

Foreign vendors' products that have a minimum of 50 per cent indigenous content will come under this new category.

The DPP 2020 also envisions long-term product support -- which would be three to five years after the warranty period is over. 

"To sustain and support platform/equipment through its operational life-cycle, the service headquarters will ensure that product support requirements for at least 3 to 5 years beyond the warranty period will be procured along with the main equipment," the DPP stated.

To facilitate greater participation of the Indian industry and develop a robust defence industrial base, use of indigenous raw materials, special alloys and software has been incentivised under the DPP 2020.

Moreover, a "price variation clause" has been introduced that will be applicable to all cases where the total cost of contract is more than Rs 1,000 crore and the delivery schedule exceeds 60 months.

According to the DPP, this clause would be inserted in procurement contracts to cater to the escalation of price from the last date of submission of bids till the finalisation by the CNC (Contract Negotiation Committee).

The DPP 2020 stated: "Leasing is introduced as a new category for acquisition, in addition to the existing 'Buy and Make' category to substitute huge initial capital outlays with periodical rental payments."

"Leasing is permitted under two categories i.e lease (Indian), where the lessor is an Indian entity and the owner of the assets, and lease (global), where the lessor is a global entity," it said.

The draft has now been put up on the Defence Ministry website for public consultations till April 17, after which it will be finalised.

Unveiling the new DPP, Defence Minister Rajnath Singh said, "The DPP-2020 is aligned with the vision of the government to empower the private industry through the 'Make in India' initiative, with the ultimate aim of turning India into a global manufacturing hub." 

📣 The Week is now on Telegram. Click here to join our channel (@TheWeekmagazine) and stay updated with the latest headlines