The defence ministry announced major changes in India’s Defence Acquisition Procedure (DAP 2020) to further promote ‘Make in India’ and  enable Ease of Doing Business.

In the last few years, the government has taken a series of measures to promote domestic defence production. According to estimates, the Indian Armed Forces are projected to spend around $130 billion in capital procurement over the next five years.

The government now wants to reduce dependence on imported military platforms and has decided to support domestic defence manufacturing. The defence ministry has set a goal of a turnover of $25 billion (Rs 1.75 lakh crore) in defence manufacturing in the next five years which includes an export target of $5 billion (Rs 35,000 crore) worth of military hardware.

Defence Acquisition Procedure

• The first Defence Procurement Procedure (DPP) was promulgated in the year 2002 and has since been revised periodically to provide impetus to the growing domestic industry and achieve enhanced self reliance in defence manufacturing. 

• In August 2019, the defence minister approved constitution of the Main Review Committee under chairmanship of DG (acquisition) Apurva Chandra for preparation of DAP 2020. 

• The DAP came into effect on October 1, 2020. 

• Formulation of DAP 2020 has been done over more than one year, incorporating comments/suggestions from a wide spectrum of stakeholders.

• The aim of the Defence Acquisition Procedure (DAP) is to ensure timely acquisition of military equipment, systems and platforms as required by the Armed Forces in terms of performance, capabilities and quality standards, through optimum utilisation of allocated budgetary resources. 

• While enabling the same, DAP will provide for the highest degree of probity, public accountability, transparency, fair competition and level-playing field. 

• In addition, self-reliance in defence equipment production and acquisition will be steadfastly pursued as a focus of the DAP with an ultimate aim to develop India as a global defence manufacturing hub.

New amendments to DAP 2020

• All modernisation requirements of the defence services and Indian Coast Guard are to be indigenously sourced irrespective of the nature of the procurement.

• Import of defence equipment and sourcing them from the foreign industry under capital acquisitions should only be an exception and undertaken with specific approval of the defence acquisition council or the defence minister.

• As advised by the ministry of finance and to reduce the financial burden on the Indian defence industry whilst maintaining financial safeguards, the requirement of Integrity Pact Bank Guarantee (IPBG) has been dispensed with.

• Instead, Earnest Money Deposit (EMD) will be taken as a bid security for all acquisition cases with Acceptance of Necessity (AoN) cost more than Rs 100 crore.

• The EMD will be valid for the selected vendor up to the signing of contracts and returned to remaining vendors post declaration of selection.

• Post contract, integrity pact will be covered through the performance cum warranty bank guarantee (PWBG). Further, as per extant government of India policy, EMD is not required from Micro and Small Enterprises (MSEs).

• To encourage wider participation and a broad base of indigenous defence manufacturing sector in the country, the total order quantities in acquisition cases are to be split between shortlisted vendors, wherever viable.

• Further, the other technically qualified bidders who have not been awarded contract will be issued a certificate by the services indicating that the product has been successfully trial evaluated, to facilitate vendors to explore other markets.

• The defence ministry also decided to cut waiting time for projects under the iDEX framework. The iDEX programme was launched in 2018 as an ecosystem to foster innovation and technology development in the defence and aerospace sectors by engaging innovators and entrepreneurs. 

• To enable the budding startup talent pool of the country to contribute towards the twin mantras of self-sufficiency and indigenisation, the procurement process under the iDEX procedure of DAP 2020 has been simplified. With this simplification, time taken from grant of AoN to signing of the contract will be reduced to 22 weeks.

• The Make-II procedure of DAP 2020, involving indigenisation of defence equipment through industry-funded projects at the prototype development stage has been simplified by incorporating single-stage composite trials of prototypes and dispensing off with quantity vetting and scaling for initial procurements.

• Post simplification, the timelines in the Make-II procedure will be reduced to 101-109 weeks from an existing total time period of 122-180 weeks.

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