On the frontline: Defence Procurement Manual 2025 eases industry concerns

Coming a full 16 years after the last Defence Procurement Manual, the latest one (DPM 2025) makes a great leap forward in streamlining and rationalising the Ministry of Defence’s (MoD’s) revenue procurement, valued at ₹1 trillion for this financial year, creating a realistic enabling system for the armed services to acquire goods and services needed for ongoing operations. It seeks to address the recurrent concerns raised by defence firms about harsh penalties, long delays, and the lack of stability in orders.

 

The 2025 version squarely addresses these issues and also seeks to promote the important goal of competitive self-reliance. To this end, DPM 2025 has significantly softened liquidity damages — or the pre-agreed sum paid by a contractor to the MoD for breaching a contract (such as for delivery delays). It has done away with liquidity damages during the development phase, imposed a minimal 0.1 per cent for the post-prototype development phase, and capped damages at 5 per cent, rising to 10 per cent only for extreme delays. The manual also seeks to stabilise conditions for developers by guaranteeing orders for up to five years, extendable to 10 years in some cases. DPM 2025 also bakes in a 15 per cent upfront provision for repair, refit, and maintenance, and doubles the scope of limited tendering from ₹25 lakh in DPM 2009 to ₹50 lakh, and beyond that in exceptional circumstances. Most critical, perhaps, is DPM 2025 removing the stipulation of obtaining a “no-objection certificate” from defence public-sector undertakings before open bidding. Now that all tenders will be awarded on a competitive basis, the scope for the emergence of a vibrant private sector in defence manufacturing has been considerably enhanced. As part of this agenda, DPM 2025 has added a chapter to promote innovation and indigenisation, encouraging technical collaboration with institutions such as Indian Institutes of Technology, the Indian Institute of Science, and universities.

 

This much-needed flexible top-down procurement framework also imposes on the system challenging standards of responsibility and accountability. For instance, to speed up the procurement process and free it from red tape, competent financial authorities (CFAs) at field and lower formations have been empowered to make independent decisions on various matters. Under the new guidelines, CFAs can grant extensions of delivery periods in consultation with their financial advisors without approaching higher authorities. DPM 2025 also empowers them to extend bid-opening dates when participation is thin, without referring to their financial advisors. A wider collegiate decision-making process acts as an automatic check and balance, but given the extensive revenue-procurement needs of one of the world’s largest militaries and the corruption scandals of the past, this issue demands vigilance.

 

The effort to modernise and restructure revenue procurement should also be matched by a similar exercise for capital acquisition, which remains plagued because of a lack of planning and labyrinthine and opaque procurement processes. The result is that purchase decisions, often made on a stop-gap basis in response to service demands, have had a deeply adverse impact on India’s combat readiness. For example, the Indian Air Force operates seven combat aircraft types — Russian, French, Anglo-French, and indigenous — resulting in a platform diversity that seriously hinders interoperability. DPM 2025 is a good start. But in a neighbourhood that is growing increasingly hostile, India’s defence readiness urgently needs an efficient all-round procurement ecosystem.