Defence Procurement Procedure: Know more about the draft DPP 2020

March 24, 2020 5:02 PM

This DPP has also stipulated that L1 ( lowest bidder in purely financial terms) will be the criterion of selection based on the commercial bids submitted by the participants.

It promises to provide our Armed Forces with the very best in a timely and efficient manner.It promises to provide our Armed Forces with the very best in a timely and efficient manner.

By Commodore Anil Jai Singh

On 20 March 2022, the Defence Minister Rajnath Singh released the draft version of the Defence Procurement Procedure (DPP) 2020. The DPP, as it is commonly referred to, provides the guidelines for all capital acquisitions to be made by the Ministry of Defence including the Armed Forces. The DPP was first introduced in 2002 to provide probity, transparency and a structured procedure which would streamline the procurement of military hardware for the Armed Forces in a time bound manner. While the DPP has definitely succeeded in introducing probity and transparency and has greatly diminished the influence of shady arms dealers much to the benefit of the system and the Armed forces, the rigidity of the procedure has been detrimental to the acquisition process.

The DPP has been a work in progress since its initiation in 2002 and though successive iterations in 2006, 2008. 2011, 2013 and 2016 have ‘improved’ upon the initial document; the results have flattered to deceive.

An initial glance through the latest document brings to the fore several obvious issues, some of which are highlighted below:

Firstly, the document itself. Successive versions of the document have become increasingly voluminous and consequently more complex to understand and interpret. From a 200-odd page document in 2012, it increased to 400 odd pages in its 2016 version and the 2020 version will perhaps be even longer (the draft released on 20 March is a staggering 748 pages). This, of course, could be to spell things out in greater detail thus attempting to simplify its comprehension but whether it actually does so Indigenous manufacture will only become evident once the document is studied in greater detail.

The second issue relates to the content. One finds at first glance that various new features have been introduced. A new category, ‘Buy (Global -Manufacture in India) has been added to the five previous ones. This calls for a global purchase to include 50% indigenous content which the foreign OEM could source from its Indian subsidiary. This appears to be encouraging but the success of this will lie in its implementation. Not many foreign OEMs have Indian subsidiaries capable of undertaking high-end manufacture but those that have should source work from there. The challenge will lie in achieving the 50% indigenous content.

What stands out in stark contrast to the previous editions of the DPP is that contracts signed through Inter-Governmental Agreements (IGAs)/Foreign Military Sales (FMS) route is exempt from offsets. This is surprising and flies in the face of the Government’s oft-repeated assertions on self-reliance and indigenisation. Most items sourced through IGAs and through FMS (the American euphemism for pushing through arms sales conveniently bypassing any laid down procedures) relate mainly to high-end equipment and platforms. Hence in these cases, dependence on the supplier country will continue till the equipment is in service ( three to four decades) and India will continue to remain strategically vulnerable to technology denial regimes and sanctions imposed at the whims and fancies of these suppliers. We seem to have forgotten the post-May 1998 sanctions which left us high and dry – institutional memory has never been a national hallmark. In previous editions, this waiver was never specifically mentioned thus leaving that discretion to the MoD which should have remained the preferred option. The MoD has been at pains to emphasise that this DPP has taken into account inputs from all stakeholders including industry, both foreign and Indian though it does seem that foreign industry inputs were selective.

The fourth issue relates to the definition of indigenous content in the DPP which makes it extremely challenging to achieve the stipulated percentage of indigenisation. It also does not encourage indigenisation with the intent of exposing the Indian industry to high-end technology and in fact restricts indigenous development to basic technologies and services. This is one aspect which merits consideration. Higher levels of indigenisation are definitely required and therefore the criterion should be accordingly decided.

Another new feature that has been introduced is Leasing. Driven primarily by the resource crunch, it is a good way to overcome capability deficits in certain areas which can be identified. However, leasing has its own challenges both from the lessor and the lessee’s perspective. Leasing of military hardware is not without precedent in India. The first INS Chakra ( a Russian Charlie-! Class SSN) was leased from the erstwhile Soviet union in 1988, the second INS Chakra ( presently in commission) was leased for 10 years in 2012 and a lease for another Akula-2 class submarine for 10 years commencing 2025 at a cost of 3,3 Bn USD was reportedly negotiated last year. However, these happened as part of a much deeper strategic relationship with the erstwhile Soviet Union and subsequently. Russia. Hence the terms and conditions for leasing from OEMs could be vastly different. The devil of course will lie in the details and will not be easily addressed due to concerns on both sides.

This DPP has also stipulated that L1 ( lowest bidder in purely financial terms) will be the criterion of selection based on the commercial bids submitted by the participants. Hence there is obviously no intention of developing a weighted matrix in which price would be an important criterion and not the only one. This raises serious doubts about the intent of the MoD to seek any meaningful Transfer of Technology ToT), because L1 and deep ToT do not go together. Technology does not come cheap so we have to decide whether we indeed are interested in technology or are quite content importing anything of value, the vulnerability and cost to the exchequer notwithstanding or continue lumbering along with manufacturing ToT as we have been doing thus far while touting impressive levels of indigenisation.

This DPP has for the first time taken the laudable step of including product maintenance and support. However, demanding only five to eight years of lifecycle support for equipment which remains in service for two to three decades is difficult to comprehend.

MoD is of the view and this has been emphasised at various fora that this DPP will be different as it will reflect India’s changed priorities in terms of indigenisation, self-reliance and value addition in technology. It promises to provide our Armed Forces with the very best in a timely and efficient manner. However, if that be so, some of these very obvious issues are indeed a cause for concern. Perhaps a more detailed examination of the document may allay or further highlight some of these concerns. It is therefore hoped that the MoD will be open to inputs from all stakeholders while finalising this draft and the final Defence Procurement Procedure is a marked improvement on its previous editions – the success of which has been debatable – and addresses the genuine concerns of the user besides focussing more attention on the avowed objective of indigenisation and self-reliance as a strategic imperative commensurate with our larger national aspirations.

(The author is Indian Navy veteran and Vice President and Head-Delhi branch Indian Maritime Foundation. Views expressed are personal.)

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