Defence procurement plan 2020

Subject: Schemes

Context:

• Union Defense minister has unveiled the Defence Acquisition Procedure (DAP) – 2020 in New Delhi.
• The government has decided not to have an offset clause in procurement of defence equipment if the deal is done through inter-government agreement (IGA)

Concept:

• The first Defense 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 defense manufacturing.
• DAP 2020 has been aligned with the vision of the Government  of Atmanirbhar Bharat and empowering Indian domestic industry through Make in India initiative with the ultimate aim of turning India into a global manufacturing hub.
• With the new Foreign Direct Investment policy announced,  DAP 2020 has adequately included provisions to encourage FDI to establish manufacturing hubs both for import substitution and exports while protecting interests of Indian domestic industry. Specific reforms enunciated in Atmanirbhar Bharat Abhiyan, have been incorporated as under:-
  • Notify a List of Weapons/Platforms for Ban on Import.  Relevant incorporation has been done in the DAP to ensure that NO equipment as mentioned in the list is procured ex import post timelines notified.
  • Indigenisation of Imported Spares.
• FDI in Defence Manufacturing: With the announcement of new FDI Policy, suitable provisions have been incorporated like new category ‘Buy (Global – Manufacture in India)’ done to encourage foreign OEMs to setup ‘manufacturing/maintenance entities’ through its subsidiary in India while enabling requisite protections to domestic industry.
• Time Bound Defence Procurement Process and Faster Decision Making.  As part of the Defence Reforms announced in the AtmanirbharAbhiyan, setting up of a PMU has been mandated to support contract management. The PMU will facilitate obtaining advisory and consultancy support in specified areas to streamline Acquisition process.

Offset clause

• Offset, in literary sense, is a factor that counterbalances or compensates an act.
• In the defence procurement context, it is an element of ‘compensation’ made by the manufacturer that mostly takes place in the form of placing a minimum per cent of value addition in the ordering country.
• Defence offset means “a supplier places work to an agreed value with firms in the buying country, over and above what it would have brought in the absence of the offset.”
• Hence under defence offset, a foreign supplier of equipment agrees to manufacture a given percent of his product (in terms of value) in the buying country. Sometimes this may take place with technology transfer