- About Defence Procurement Procedure 2016
- Significance of DPP 2016
- Scope of Indian Defence manufacturing sector
- Private sector in India’s Defence industry
- Indian Navy- best in indigenisation
The initial feedback from all stakeholders, including Defence industry and end-users, indicates that recently announced Defence Procurement Procedure 2016 has ironed out many issues to enhance the Defence manufacturing sector.
About Defence Procurement Procedure 2016:
The Union Defence Minister Manohar Parrikar on 28 March 2016 unveiled the Defence Procurement Procedure 2016 (DPP 2016) on the sidelines of the Defexpo-2016 held at Goa.
- The DPP 2016 will replace the Defence Procurement Procedure 2013 (DPP 2013). It will come into force on 1 April 2016.
- The DPP 2016 aims to ensure timely procurement of defence (military) equipment, systems, and platforms required by the armed forces through optimum utilization of allocated budgetary resources.
- The DPP 2016 has been framed based on the recommendations of the Dhirendra Singh Committee that was appointed in May 2015 to review the DPP 2013.
- A new procurement category — Indigenously Designed, Developed and Manufactured (IDDM) — has been introduced and accorded top priority.
- Under the new DPP, Capital Acquisitions Schemes are broadly classified into 3 categories:
- Buy scheme: Under the Buy scheme, outright purchase of equipment and procurements are further categorized as Buy (Indian- IDDM), Buy (Indian), and Buy (Global). IDDM stands for Indigenously Designed Developed and Manufactured.
- Buy and Make scheme: The procurements are categorized as Buy and Make and Buy and Make (Indian).
- Make Scheme: It seeks developing long-term indigenous defence capabilities and procurements.
Procurement of defence equipment can be arranged in decreasing order of priority such as:
- Buy (India-IDDM).
- Buy (Indian).
- Buy and Make (Indian).
- Buy and Make.
- Buy (Global)
Significance of DPP 2016:
- The revised procedures provide more flexibility to the end-users and the industry to work together, especially on development projects.
- DPP 2016 has also opened up several co-development and co-production avenues for Indian as well as foreign companies.
- For the first time, the defence ministry has accepted the industry’s longstanding request for linking defence procurement with defence production. This inter-linkage would go a long way in realising Make in India in defence.
- The DPP also addresses issues like incentives to move the Indian defence industry up the value chain. Various provisions remove ambiguities, ensure transparency, offer a level playing field and clearly lay down procedures.
- The new DPP would help India reduce its dependency on foreign countries and source defence equipment within the country.
- By introducing and according the highest priority to ‘Indigenously Designed, Developed and Manufactured procurement’, DPP 2016 will definitely spur more design development activities within the country and contribute towards much higher indigenous content and will finally create a vibrant domestic defence industrial base.
According to the Ernst and Young report, if the Indian government’s ambitious plans for indigenous manufacturing take off properly, India can save as much as $50 billion from its likely spend of over $260 billion on defence equipment in the next 12 years.
Scope of Indian Defence manufacturing sector:
- Being the multi-billion dollars and most lucrative defence market in the world, India provides several opportunities for Indian and foreign corporate entities for defence manufacturing.
- This industry has the potential to become a huge foreign exchange earner and also lead India to its professed goal of self-reliance.
- About 60% of India’s defence requirements are met through imports.Through the Make in India campaign, the defence sector has moved from the periphery to the core of Indian manufacturing.
- Several CII reports have suggested that the sector not only has the potential to augment manufacturing but also add nearly one million direct and indirect jobs. Some of the top industrial houses have already made some inroads into the sector. Several more are waiting for the right opportunity.
Private sector in India’s Defence industry:
- The private sector is already in the field, but in a small way.
- FDI in defence was raised from 26 percent to 49 percent soon after the Modi government came to power.
- The latest announcement will give them the much needed impetus to go ahead. Significant players like the Tatas, L&T, Reliance, Punj Loyd, Fokker Elmo and India Forge, Mahindra and Mahindra, are already in the field.
- India’s private sector has welcomed the new policy.
Indian Navy- best in indigenisation:
- Among the three services, the Indian Navy has been the best in sourcing equipment from the country.
- The Navy had a design bureau in its ranks since the 1950s. This is why the Navy is able to build the platform for its warships and patrol boats.
- India sold its first offshore patrol vessel (the Barracuda) to Mauritus for a cool $58.5 million in December 2014.
- Most of the warships and patrol boats used by the Navy are homegrown, though of course, the engine and much of the equipment is imported. But that is common all across the world. So if the Navy can do it, so can the Army and Air Force.
But that will take time. However, India is on its way to building an industrial defence base in the coming years.