India unveils new policy for buying weapons and platforms for its defence sector

After three months of intense deliberations, the Indian Defence Ministry has come up with new norms to buy weapons and equipment for the Indian armed forces. DG Acquisition, Satish Agnihotri and his team, by the looks of the salient features released by the Defence Ministry, has managed to take most concerns of the Indian defence sector on board and have designed a policy that will encourage private sector players in India to enter the defence manufacturing in a bigger way than before. While a detailed analysis will have to wait, here’s a press release that gives out the salient features of the new policy.
Salient Features of Defence Procurement Procedure- 2013
New Delhi: Jyaistha 11, 1935
                                                                                                             Saturday, June 01,  2013
The Salient features of the DPP- 2013, promulgated by MoD today are as follows:
1.The first major change that has been brought in relates to the introduction of the ‘preferred categorisation’ in the following order; Buy(Indian), Buy & Make(Indian), Make(Indian), Buy & Make, Buy(Global). While seeking the approval for Áccord of Necessity (AoN) in a particular category, say, Buy (Global), it will now be necessary to give justification for not considering the other higher preference categories. This is expected to give a stronger impetus to indigenization. (a new Para 20a)
2.Stipulations related to the indigenous content have been clarified and made more stringent. Indigenous content requirements will now extend all the way to the lowest tier of the sub-vendor. Hence, import content in the products supplied by the sub-vendors will not qualify towards indigenous content’. (Para 4)
3.Besides this, the requirement of the prescribed indigenous content, e.g. 30% in the Buy (Indian) category is to be achieved on the overall cost basis, as well as in the core components i.e. the basic equipment, manufacturers recommended spares, special tools and test equipments taken together. In addition, the basic equipment must also have minimum 30% indigenous content at all stages including the one offered at the trial stage. It has further been stipulated that an indigenization plan will be provided by the vendor. These stipulations will ensure more meaningful efforts towards indigenization.
4.While a penalty has been stipulated for not achieving the required indigenous content at a given stage, a scope to make up the deficiency at later stages has been provided.
5.Likewise, in the Buy and Make (Indian) cases, there is no stipulation regarding the minimum indigenous content in the Buy component and the Indian vendor is given the elbow room to achieve the prescribed indigenous content in the overall delivery. This enables the Indian vendor the time to absorb ToT, set up manufacturing facility while concurrently meeting the service requirements.
6.A method for assessment of indigenous content, based on self certification by vendors, has been given (Appendix ‘F’ to Chapter I) while keeping provision for audit by MoD or its nominated agency, if found necessary.
7.A major set of changes aimed at making the procurement process speedier includes the stipulation to finalize the SQRs before seeking the accord for ‘Acceptance of Necessity’ (Para 17 – Chapter) and reducing the validity period of an AoN from 2 years to one year. This will bring down the processing time of individual cases significantly.
8.Procurement cases are also expected to be speeded up on account of enhanced delegation of powers of the SCAPCHC from Rs 50 Crores to 150 Crores and the power of the DPB from 150 Crores to 300 crores (Para 18).
9.In order to encourage timely submission of the bids by the vendors and to discourage last minute requests for extension of time, it has been stipulated (Para 33) that any request for extension of the bid submission date must be made at least two weeks prior to the bid submission date with adequate justification.
10.Impetus to indigenization would also require simplification of the Buy and Make (Indian) and Make procedure. The exercise to simplify the Buy and Make (Indian) procedure has been completed doing away inter alia with the requirement of short-listing the vendors through the ‘Project Appraisal Committee’ while keeping the validity of the AoN to two years permitting comprehensive consultations with the Industry (Para 25a). This is expected to bring more projects under the Buy and Make (Indian) category. Simplification of the Make procedure is underway and is expected to be completed in few months.
11. In Buy (Global) cases, it will now be possible for the Indian vendor to give Maintenance ToT to another Indian vendor of their choice (Para 28) . The  MToT partner is no longer required to be nominated by the DDP.
12.The appendix F and G to the RFP i.e. the Payment Terms and Commercial Offer have been recast as ‘Commercial Clauses’ and ‘Evaluation Criteria of Price Bid Format’. These include use of the International Commercial Terms (INCOTERMS 2010), bringing payment terms for Indian Bidders on par with those for the foreign bidders, specificity in stages and modes of payment and removal of excise duty in determination of L-1.
Apart from the major salient features of the DPP 2013 enumerated above, a number of other changes have been made which are procedural in nature and aim at bringing clarity and efficiency and in the procurement procedures. Further measures to strengthen the Indian Defence Sector are under consideration and will be brought about after due consultation with all stake holders. In the meantime, it is expected that this document will be well received by the Industry, the users and other stakeholders at large in the Indian Defence Sector.