New policy to boost Indian defence sector

Written by fe Bureaus | New Delhi | Updated: Oct 30 2009, 09:28am hrs
In an effort to promote indigenisation of the Indian defence industry, the new defence procurement procedure (DPP) 2009, would have a new category of 'Buy and Make (Indian)' under transfer of technology.

The DPP-2009 would also ensuring transparency and accountability in all procurement cases and liberalise offset provisions to enable vendors to fulfil their obligations. The DPP-2009 will be effective from November 1, 2009.

A new category of Buy and Make (Indian) has been introduced. If a project is selected by the Defence Acquisition Council to be categorised as 'Buy and Make (Indian)', Indian firms, both public and private, will play a lead role in negotiating and obtaining technology and co-production arrangements with the foreign original equipment manufacturers (OEMs). As such, the request for proposal will be issued to the Indian firms and not to the foreign OEMs. Under the existing procedure, if an item is categorised as 'Buy and Make', the government identifies a production agency for transfer of technology. This method did not encourage formation of joint ventures (JVs) or alliances for co-production with Indian companies. Under DPP-2009, Indian firms identified to have requisite technical and financial capabilities would be required to submit project proposals indicating detailed roadmap for development and production of the items over its life cycle. They will also be required to spell out the proposed production arrangement with the foreign OEM along with the content of the transfer of technology (ToT). The product so manufactured and supplied by the Indian company must have 50% indigenous content.

DPP-2009, would enable pro-active participation of Indian industry in manufacturing defence products through co-production arrangements, such as JV, with foreign manufacturers and through transfer of technology. A major impediment in the growth of defence industry in the country has been lack of information with the domestic industry on defence requirements. Such information has generally been treated as classified. Consequently, the indigenous industry is unable to plan R&D technology, upgradation or joint collaboration with associated foreign industries. Under Amendment 2009 to the DPP-2008, a public version of the Long Term Perspective Plan of the Armed Forces outlining technology perspective and capability roadmap covering a period of 15 years will be widely publicised and made available on MoD website. Further, to facilitate active participation of domestic industry in acquisition planning, representatives of companies and Industry Associations will be invited for presentations and consultations in procurement meetings before decisions on the source of procurement are taken.

An 'Integrity Pact' is presently required to be signed between government and the vendors for all procurement schemes over Rs 100 crores. This is a binding agreement between the government department and bidders for specific contracts in which the government promises that it will not accept bribes during the procurement process and bidders promise that they will not offer bribes. However, by an amendment, the role of the independent monitors (IM) is more defined and enlarged and enables them to scrutinize complaints with regards to violation of Integrity Pact.

The amendment explicitly authorises IMs to peruse the relevant office records in connection with the complaints sent to them by the buyer. This amendment will enhance probity and public accountability.