NEW DEFENCE PROCUREMENT POLICY

NEW DEFENCE PROCUREMENT POLICY

There was an announcement recently about change in Defence Procurement Policy related to splitting of Make category. It was intended to target the Indian industry; to involve them in business design, development and manufacture of defence equipment.

It has been decided to split the Make procedure into 3 categories. The first category is the same that existed earlier. Once the RFP (Request For Proposal) is issued, the development agencies will be identified and they will develop the prototype of the equipment. So far, the funding was to the extent of 80% of the cost of the development. The recent announcement says that it will be increased to 90%. This mitigates the risk for development agencies.

The second category of Make procedure is that the Indian companies would be free to develop the prototype of some equipment which they think will be required by the Ministry of Defence going by what is mentioned in the Technology Perspective and Capability Roadmap (TPCR) suo motu without any funding by the MoD. But, if for that equipment MoD does not issue the RFP within 2 years of the successful development of the prototype, then they will be reimbursed. It will be reimbursed in full.

The third category is actually specifically designed for the MSMEs, who have been complaining for a long time that they have been left out because of stringent selection criteria. MSMEs are big component suppliers. They are also into developing niche technologies which go into manufacturing and integration with big platforms. Hence the third category is reserved for MSMEs.

A new category has been added to the exiting 5 categories through which procurement is done. According to this new category, Indian designed, developed and manufactured equipment should have 40% indigenous content. This means that Indian industry will be able to design and develop equipment and they will get special treatment under this category.

In India, defence manufacturing was mostly limited to public sector companies. Most of these public sector manufacturing units have suffered from delays on the one side and poor quality on the other side. Now, the private companies are coming into the scene. For instance, Anil Ambani group has recently announced that they have tied up with State run companies in Russia to service and support the Russian origin naval vessels and helicopters. Similarly, Swedish SAAB group tied up with Adani group.

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