New Defence Acquisition Procedure – 2020- DAP-2020

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Government’s new policy for defence acquisitions, was approved by the Defence Acquisition Council- (Headed by Defence Minister)

The government has decided to drop the offset clause in procurement of defence equipment if the deal is done through inter-government agreement (IGA), government-to-government or an ab initio single vendor.

What is the Offset Clause :- The offset clause requires a foreign vendor to invest a part of the contract value in India. Offsets, however, will continue to be part of multi-vendor competitive procurement contracts.

Push for Aatma Nirbhar :- The DAP-2020 has reserved procurement under several important categories for companies that are owned 50 per cent or more by Indians.

The categories including Buy (Indian — Indigenously Designed, Developed and Manufactured), Make I — with 70 per cent initial government funding, Make II — industry funded, Production Agency in Design and Development, and Strategic Partner model will be exclusively reserved for Indian vendors with ownership and control by resident Indian citizens with up to 49 per cent maximum FDI.

The government has also decided to increase the indigenous content (IC) requirement for all projects from 40 per cent to 50 per cent earlier, depending on the category, to 50 per cent to 60 per cent now. Only under procurement through Buy (Global), foreign vendors can have 30 per cent IC from Indian companies.

Leasing :- A new chapter for leasing has also been introduced. Leasing or “asset acquisition for a limited period” finds a dedicated chapter in the procurement policy for the first time, allowing the government to hire equipment from either domestic or foreign vendors. This will help in getting Non Warfare items like Transport etc in Rental form.

Software Chapter :- There is a chapter that also looks at procuring software. The chapter on Information Communication Technology will look at “peculiar issues related to procurement of ICT intensive equipment especially of Interoperability & Built-in Upgradability, enhanced security requirements and change management.

New Category :- A new Make III category has also been introduced, which will be indigenously manufactured defence equipment and platforms or spares and assemblies intended to enable import substitution.

The Long Term Integrated Perspective Plan has now been re-designated as Integrated Capability Development Plan (ICDP), and will cover a period of ten years, instead of 15 years earlier.

The government has also tried to “rationalise” the trial and testing procedures to bring down the procurement timelines.

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