Critically analyse the key features of the Defence Procurement Procedure (DPP)-2016.
Defence procurement procedure was brought in with an aim to ensure timely procurement of defence (military) equipment, systems, and platforms required by the armed forces through optimum utilization of allocated budgetary resources.
Benefits of the DPP-2016
- Threshold at which offset kicks in was has been raised from Rs 300 cr to Rs 2000 cr. This enhances the ease of doing business as there would be lesser number of proposals for scrutinizing under offset scheme.
- Delisting of about 66% of the items from defence export clearances will reduce the license raj in the defence sector.
- IDDM and Buy and make Indian categories will provide an opportunity for the Indian companies to forge partnership with the global giants which would aid in Indianisation. This will also aid in integrating of the Indian companies with the global value chain.
- It gives boost to the MSME sector as it reserves government funded projects with an estimated development cost of 10 crore or less.
- Outright purchase of equipment and procurements under this scheme are further categorized as Buy (Indian- IDDM), Buy (Indian), and Buy (Global). IDDM stands for Indigenously Designed Developed and Manufactured.
Challenges for the Industry
- Raising of threshold for offset clause and technical oversight will result in reduced opportunities for Indian manufacturers and it runs contrary to Make in India scheme.
- Lack of clarity on IDDM will lead to complexity in determining indigenous content and will give rise to discretionary actions and may lead to corruption.
- Buy (Indian) component has not resulted in the increased sourcing from the domestic vendors.
- Make category was introduced in 2006 and not a single project has kicked off under it.
To address various challenges the ministry of defence has brought out some amendments to the DPP-2016. No country can emerge as the superpower if it is import dependent for the defence equipments. India needs to work on DPP to promote in indigenisation of defence sector.