Imports to be last resort, new defence policy to push Make in India

According to sources, the modified Defence Procurement Procedure is expected to be finalised by the end of this month

With Make in India the new mantra for defence manufacturing, the government has decided against importing equipment unless it is impossible to make it at home and this thrust on indigenisation will reflect in the new Defence Procurement Procedure (DPP), sources said.

According to the highly placed sources, the modified DPP, a draft of which is ready and under discussion in the defence ministry, is expected to be finalised by the end of this month.

The document, along with provisions for encouraging domestic industry, will have its spirit summed up in a preamble that will stress on Make in India.
 

"The DPP will have a preamble, which will clearly state that every product should be designed, developed and made in India," a highly placed source told IANS, not wishing to be identified by name.

"Imports will be allowed only in case we cannot make it in India and as a last resort," the source said, quoting from the preamble.

The defence ministry has recently cleared several big ticket proposals under the Make in India initiative and the new procedure will push it further.

Among other provisions, the DPP is likely to initiate the process for a Technology Development Fund (TDF), with initial capital of Rs 100 crore, a defence ministry official said.

This fund will provide financial support to the public and private sector, including small and medium enterprises, and over 69 academic and scientific research and development institutions other than the Defence Research and Development Organisation. The fund will provide support for development of defence equipment and systems that enhance cutting-edge technology in the country.

There is a provision for promoting domestic manufacturing in the existing DPP under the 'Make Procedure' but officials said it was "not yielding results".

The government is now likely to provide 80 percent of the research funding for promoting domestic manufacturing in the defence sector.

Other changes being made in the procedure include formulating a way to address complaints, as even anonymous and unsigned complaints often delay the procurement procedure. There is also a proposal to redefine the procedure for blacklisting a company.

"Nuanced changes in the offset policy are also on cards, as the ministry felt the current offset policy is not effective," the official said.

"In most cases we are being forced to deviate or give concessions to the foreign companies because our policy is not right," the official added.

He said under the modified DPP, the offset policy will be linked to Make in India.

The modified procedure has a provision for asking foreign suppliers to forge links with Indian companies and manufacture spare parts in India.

"We have had discussions with the Russians, Americans, Britons and French on this (offsets) and we have got a positive response," the official said.

The Defence Procurement Procedure (DPP) was first drafted in 1992 and reviewed in 2002. It was then revised in 2003, 2005, 2006, 2008, 2011 and 2013.

A 10-member panel was constituted by Defence Minister Manohar Parrikar to modify the DPP document which gave its draft report last month.

(Anjali Ojha can be contacted as anjali.o@ians.in)