New defence procurement procedure in early 2013

The IDS deputy chief urged industry to develop SMEs, to produce the components going into larger and more complex system

A top defence ministry (MoD) official on Thursday revealed the Defence Procurement Procedure of 2011 (DPP-2011), which governs the buying of military weapons and equipment, would be modified in early 2013.

“The Defence Procurement Policy is undergoing changes; and the 2013 edition of the DPP will come out early next year,” said Air Marshal M Matheswaran, deputy chief of the Integrated Defence Staff (IDS), addressing a KPMG-organised defence industry gathering in New Delhi.

He said the new DPP would liberalise defence procurement further. This conformed to industry expectations, as it has been the trend in successive modifications to the DPP in 2005, 2006, 2008 and the currently valid DPP-2011. Matheswaran urged private industry to focus less on the high value, high technology weapons platforms (eg, aircraft and tanks) on which the big defence money is spent. Instead, he suggested, private industry should emulate the automobile parts industry by setting up manufacturing units that were part of a global supply chain. These small units would form the backbone of a countrywide defence industrial base.

In the MoD’s planning, such a defence industrial backbone is crucial for maintaining, repairing, overhauling and upgrading the complex defence platforms that are currently being bought from abroad and manufactured under licence in India.

“Rather than focusing on large weapons systems integration and manufacture as the only way, I think we need to break down the supply chain into many component parts, so that you become part of a global supply chain. If you look only at the Indian military as the only source of your order book, then you’re not going to have continuous orders for any length of time,” said Matheswaran.

The IDS deputy chief urged industry to develop small and medium enterprises, to produce the components going into larger and more complex system that would eventually be built by large conglomerates like the Tatas, L&T and the Mahindras.

Highlighting the “enormous” opportunities for private industry, Matheswaran pointed out the scope for India’s capital expenditure to grow from its current Rs 80,000 crore. “Our defence budget is still much less than the global average of three per cent of GDP. We haven’t exceeded even two per cent of the GDP,” he said.