Key Notes on Defence Procurement Procedure 2020

The Ministry of Defence (MoD) has finally issued the long-awaited Defence Acquisition Procedure 2020 (DAP 2020), which went into effect on October 1, 2020, and will replace the previous version, Defence Procurement Procedure 2020. The Defence Procurement Program 2020 (DAP 2020) controlled the acquisition of capital defence equipment and was implemented to increase the indigenous manufacture of defence equipment further. DAP 2020 will apply to all acquisition projects for which an RFP has not yet been published (including those in the pre-Acceptance of Necessity (AoN) stage, those in the AoN stage, and those in the Make and D&D stage). 

Defence Procurement Procedure

When the defence procurement procedure (DPP) was originally implemented in 2002, it was intended to simplify and time-bound the acquisition of military hardware for the Armed Forces. Following a reform in 2016, the organisation placed a greater focus on military systems conceived, developed, and built in-country to achieve self-reliance in the sector of defence production. The Project Management Unit will facilitate operations and decision-making in a more efficient and timely manner; preference will be given to producers that produce full defence goods rather than components; Increase the multipliers in the offset policy about the direct purchase, TOTs, and FDI to incentivise the discharge of offsets; Easing of trials and testing, such as avoiding duplicate trials, modifying the scope of trials, eliminating repeat inspections, and so on. 

Defence Procurement Manual 2020

Defence Acquisition Procedure (DAP) 2020 aims to streamline the defence acquisition process and institutionalise monitoring mechanisms with concurrent actions utilising digital technologies and databases to select the best equipment transparently and competitively while providing adequate opportunities to capable vendors. The Government of India’s Make in India initiative aims to increase the participation of Indian vendors, including small and medium-sized enterprises (SMEs). As a result, the “Make” procedure has been further refined in DAP 2020 to make it more objective and time-bound, focusing on the Indian industry, particularly SMEs. One of the characteristics of this DAP is that it reduces the timeframes acceptable for certain operations while also institutionalising rigorous methods to check for probity at various phases of the acquisition process. 

Where speciality technology-based equipment, such as aerospace, is required, but there is no or limited supply of needed materials in the nation, the SHQ may suggest a lower integrated circuit (IC) rating than specified in the category. It will be applicable to discharge Offsets if the IC of the base contract price falls to less than 30 percent of the base contract price in such instances. The AoN-assigned authority may authorise a threshold of IC greater or lower than the thresholds specified for certain categories. When applying for AoN, it is necessary to provide a specific reason for the request. 

Capital Procurement in Defence

On Friday, the Defence Ministry revealed that a quarter of the domestic capital procurement budget totalling Rs. 21,000 crore would be designated for private industries in 2022-23. 

Furthermore, it has been agreed that Rs. 1500 crore would be set aside for purchase from startups to nurture innovation and support the development of defensive technologies. This includes companies that are part of the Innovations for Defence Excellence (iDEX) programme and funded via domestic capital procurement allocations. 

A decision had been made earlier by the Ministry of Defence to allocate 68 per cent of the capital procurement budget for the whole domestic sector for the fiscal year 2022-23. More than Rs. 84,000 Crore has been set aside exclusively for the domestic defence sector in the current financial year due to this allocation. She also made a major push for local defence equipment manufacturers when she presented the Union Budget in Parliament, allocating 68 per cent of the capital budget to them and reserving 25 percent of research and development money for private enterprises, start-ups and academic institutions.

Conclusion

The whole military budget, which includes pensions, was Rs 5.25 lakh crore in 2021-22, an increase from Rs 4.78 lakh crore in the previous fiscal year. Approximately 13.3 per cent of the total spending anticipated by the Narendra Modi administration for the fiscal year 2022-23 would be allocated to the defence budget. It also accounts for around 2.03 per cent of India’s nominal GDP (estimated at Rs 258 lakh crore for the fiscal year 2022-23). More than Rs. 84,000 Crore has been set aside exclusively for the domestic defence sector in the current financial year.