Defence Acquisition Procedure

In today’s edition of Current Affairs Dialog Box, we will discuss the Defence Acquisition Procedure in detail and why it was in the news recently. The topic forms an integral part of the UPSC exam preparation that demands the attention it deserves. It has relevance from the Civil Services exam syllabus in the following way:

For Prelims: Defence Acquisition Procedure.

For Mains: Government policies & interventions, indigenization of technology, security challenges & their management in border areas.

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Why in the News?

Recently, the government has given in-principle permission to a raft of indigenous defence initiatives that will involve industry design and development.

• The project covers light tanks, airborne stand-off jammers, communication equipment and simulators under Defence Acquisition Procedure (DAP).
• The Defence Ministry has approved nine such projects, four under the 'Make-I' category of the Defense Acquisition Procedure 2020 and five under the 'Make-II' category.

Probable Question

Discuss the significance of Defence Acquisition Procedure in Indigenisation of Defence.

About Defense Acquisition Procedure (DAP) 2020:

• The Ministry of Defence released the Defence Acquisition Procedure 2020 (DAP 2020) in September 2020, in a move to further streamline the procurement process and provide a boost to indigenous arms manufacturing.
• The new policy superseded the Defence Procurement Procedure of 2016.

Also read: Best Way to Prepare Economy for UPSC Prelims

Highlights of the New Policy

• Procurement Categories: A new category, ‘Buy (Global-Manufacture in India)’ has been introduced in place of the earlier ‘Buy and Make’.
  • The new prioritized category is meant to incentivize foreign companies to manufacture in India.
  • The category also allows foreign companies to set up Maintenance, Repair and Overhaul (MRO) facilities in India. 
• Thrust on Greater Indigenization: The DAP includes a host of enabling provisions to promote greater indigenisation in arms manufacturing.
  • DAP 2020 defines an “Indian vendor” as a company that is owned and controlled by resident Indian citizens, with foreign direct investment (FDI) not more than 49 per cent.
  • It promotes greater indigenous content in arms and equipment of the military procures, including equipment manufactured in India under licence.
  • In most acquisition categories, DAP-2020 stipulates 10 per cent higher indigenization than DPP 2016.
• Import embargo list: The import embargo list, which presently consists of 101 items, is planned to be implemented in a staggered manner up to December 2025.
  • An embargo is a government order that restricts commerce with a specified country or the exchange of specific goods.
• Revamped Offset Guidelines: The government has ruled that if a deal is done through an inter-government agreement (IGA), government-to-government, or an ab initio single vendor, there will be no offset clause.
  • The offset clause requires a foreign vendor to invest a part of the contract value in India.

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About ‘Make’ Category: The 'Make' Categories aim to achieve the objective of self-reliance by involving greater participation of Indian industrial eco-system including private sector through the following procedures:- Make-I (Government Funded): Make-I involved in development of big-ticket platforms such as light tank and communication equipment with Indian security protocols. Make-II (Industry Funded): Projects under 'Make-II' category will involve prototype development of equipment/ system/ platform or their upgrades or their sub-systems/ sub-assembly/assemblies/ components, primarily for import substitution/innovative solutions, for which no Government funding will be provided. Make-III (Indigenously Manufactured): It covers military hardware that may not be designed and developed indigenously but can be manufactured in the country for import substitution, and Indian firms may manufacture these in collaboration with foreign partners.

Other Initiatives to Boost Domestic Production of Defence Equipments

• Defence Industrial Corridors: A defence corridor refers to a route or a path along which domestic productions of defence equipment by public sector, private sector and MSMEs are lined up to enhance the operational capability of the defence forces. Government has established two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu. 
• Tamil Nadu Defence Industrial Corridor: The corridor was inaugurated in 2019.
• It comprises Chennai, Tiruchirappalli, Coimbatore, Salem and Hosur. It will create new defence production facilities and promote clusters with necessary testing and certification facilities, export facilitation centres, technology transfer facilitation, etc.
• Uttar Pradesh Defence Industrial Corridor: It will have 6 nodes – Aligarh, Agra, Kanpur, Chitrakoot, Jhansi and Lucknow.
• It aims to bring up the state as one of the largest & advanced Defence manufacturing hubs and put it on the world map.
• Corporatization of the Ordnance Factory Boards: Recently Seven new defence companies have been carved out of Ordnance Factory Board (OFB), as part of a major defence sector reform.
• The main idea behind these efforts is to improve the efficiency in the functioning of the units; improvement in the quality and making the end products competitive.
• The OFB which is directly under the Ministry of Defence was unable to make profits.
• Defence India Startup Challenge(DISC): DISC aimed at supporting Startups/MSMEs/Innovators to create prototypes and/or commercialise products/solutions in the area of National Defence and Security.
• It has been launched by the Ministry of Defence in partnership with Atal Innovation Mission.

• SRIJAN Portal: ‘SRIJAN’ portal is a one stop shop online portal that provides access to the vendors to take up items that can be taken up for indigenization.
• Draft Defence Production and Export Promotion Policy 2020:
• The Ministry of Defence has formulated a draft Defence Production and Export Promotion Policy 2020 (DPEPP 2020) to achieve a turnover of Rs. 1,75,000 crore including export of Rs. 35,000 crores in Aerospace and Defence goods and services by 2025.
• Mission Raksha Gyan Shakti: Mission Raksha Gyan Shakti was launched in the year 2018 with the aim to boost the Intellectual Property Right (IPR) culture in the indigenous defence industry

Conclusion

• The DAP 2020 makes a brave attempt to promote higher indigenization and speed up the procurement process. 
• Furthermore, the self-reliance efforts of the DAP 2020 needs to be deepened by articulating a long- and medium-term defence indigenization plan as follow up documents of the 10-year and five-year acquisition plans.

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