Defence Ministry should review procurement procedure: Assocham

Terming some of the clauses of its procurement procedure as "unreasonable and impractical", industry body Assocham has requested the Defence Ministry to review rules regarding indigenous content in military hardware offered for trials to the armed forces.

"Ensuring adherence to 30-50 per cent indigenisation at trial stage is an unreasonable and impractical requirement that needs to be re-considered, more so as currently India neither possesses any know-how nor the infrastructure to manufacture high-end defence equipment," Assocham said in a note submitted to the Defence Minister A K Antony.

In its note, the industry body said it has also highlighted that certain provisions in the Defence Procurement Procedure (DPP) are heavily lopsided in favour of Defence Public Sector Undertakings (DPSUs).

"Though, the DPP seeks to provide a level playing field to domestic private players in the defence sector, the provision vis-a-vis benefit of Exchange Rate Variation (ERV) is biased as it is extended only to DPSUs in ab-initio single vendor cases or when nominated as a production agency," said Assocham Secretary General D S Rawat.

Reiterating its demand for a hike in foreign direct investment (FDI) to 100 per cent, Assocham has said it would help address security concerns thereby building an enabling environment for transfer of technology from foreign original equipment manufacturers (OEMs).

"The 26 per cent cap has completely failed as total FDI inflows in defence sector during the course of past 10 years have been a meagre $5 million along with a few joint ventures as against worth over $280 billion FDI received across different sectors by India," Rawat said.

"Besides, ensuring intellectual property (IP) protection in defence is also of grave significance as foreign OEMs are reluctant to transfer technology due to the 26 per cent FDI cap as well as perceptions about inadequate IP protection," he said.

The chamber said it has also suggested the defence ministry to come up with security guidelines to allay security concerns while allowing higher FDI participation by foreign OEMs.

Amid other suggestions, Assocham has suggested the ministry to review the procedure proposed in DPP 2013 for calculating value of indigenous content as it being a complex process it discourages Indian vendors from participating in procurement programmes.