NEW DELHI, Apr 20:
Stung by scams in acquisition from foreign vendors, the Defence Ministry today finalised a new procurement policy under which Indian public and private sector will be given first priority for military procurements and will help in plugging loopholes that allow corruption.
To avoid scams such as the AgustaWestland chopper deal and enhance transparency, the Ministry also approved a proposal under which Services headquarters would be required to freeze specifications of the desired products before they are approved by the Defence Acquisition Council (DAC).
The new changes in the policy will also end the virtual monopoly of the PSUs and ordnance factories in the defence sector as they will not be automatically nominated for maintenance and repair of systems procured from abroad as the private firms will be allowed to take part in these contracts.
“Preference for indigenous procurement has now been made a part of DPP through an amendment that provides for a preferred order of categorisation, with global cases being a choice of last resort. The first option would be to buy from India followed by ‘buy and make India’,” the Defence Ministry said here.
Under the second category, private and public sector firms can tie up with foreign vendors and produce the equipment required by the armed forces within the country.
The meeting of the DAC headed by Defence Minister A K Antony also made it mandatory for the armed forces to explain to the Ministry that why they are not preferring to buy from Indian sources or excluding the higher category, the ministry said.
The other three categories include ‘Buy and make with Transfer of Technology’, ‘Make’ and the last option of buying the equipment from foreign vendors directly under the ‘Buy (global) category.
Addressing the meeting, Antony said, “the only way forward for the country is rapid indigenisation of defence products, with both the public and the private sectors playing pivotal roles in this endeavour.
“The government will make all efforts to create genuine level-playing field for Indian manufacturing industries vis-à-vis global players,” he said.
In the meeting today, Antony also gave up his powers to approve deviations from tender specifications by the bidders to the DAC which includes the Defence Secretary and the three Services chiefs among several of its members.
Rattled by various scams in the past, the Defence Ministry has been working on bringing out changes in its procurement policy for the last few months under which the impetus has been on enhancing the defence manufacturing base in the country.
Under the proposal for freezing specifications for desired equipment before the DAC approval for its purchase, the Ministry said from now on there will be “a stipulation to freeze Service Qualitative Requirements before the Acceptance of Necessity stage (in DAC) and the validity of AoN has also been reduced from two years to one year.”
“These measures are expected to expedite the acquisition process and increase transparency,” the Ministry release said.
Ending the monopoly of public sector undertakings in maintenance of equipment procured from abroad, the Ministry said, “an amendment has been approved that does away with nomination by Department of Defence Production and facilitates selection of Maintenance Transfer of Technology (MToT) partners by Indian bidders.”
“This measure is expected to have a positive impact on private sector participation in maintenance, repairs and overhaul work,” it said.
The DAC meeting also simplified the procedures under the ‘buy and make India’ category under which the Indian vendors form joint ventures with global firms to build required items in India.
“The DAC has approved an amendment further simplifying this complex category. Its procedures have been brought on par with other categorisations, resulting in faster processing of cases under this category,” the ministry said.
The Ministry said it has a limited number of acquisition cases under the ‘Make’ and ‘Buy & Make (Indian)’ categories, with an estimated value of Rs 1,20,000 crore and instructions have been issued for speedier conclusion of these cases.
To help the domestic industry prepare for meeting the requirements of the armed forces, the DAC approved release of a public version of its 15-year perspective document (LTIPP), for 2012-2027 outlining the ‘Technology Perspective and Capability Roadmap’ (TPCR).
“The TPCR will provide useful guidance to the Indian defence industry for boosting its infrastructural capabilities and directing its R&D and technology investments,” the Ministry said.
To ensure that the forces have access to reliable supply chains in times of urgent need, the Ministry has defined the indigenous content “in an unambiguous manner, providing requisite clarity and a common understanding.”
The DAC also approved an amendment mandating consultations to begin sufficiently in advance of actual procurement by Services, so that capital acquisition plans can be translated into national defence Research and Development and production plans.
“In addition, a high-level Committee has also been constituted for simplification of ‘Make’ procedures, with a view to unleash the full potential of this important category,” the Ministry said.
Under the make procedures, the DRDO produces the equipment for the armed forces.
The Ministry also approved an enhanced financial powers for the Services headquarters from Rs 50 crore to Rs 150 crore for acquiring equipment.
This will help the Services to procure the items at a faster pace without getting approval, the Ministry said.
The Ministry also approved the Defence Items List and sent to Department of Industrial Policy and Promotion for notification, which will bring required clarity in the licensing process.
“The Ministry has categorically clarified to DIPP that dual-use items will not require licensing, thereby bringing added clarity to the licensing process,” it said.
The Ministry has also approved draft security guidelines for the private sector firms to adopt under which they will have to maintain a minimum-required security perimeter for their facilities.
“Draft Security Guidelines that will apply to licensed defence industries have been circulated for consultations with various stakeholders,” it said.
The Defence Ministry said it will take up the matter of rationalisation of tax and duty structures impinging on Indian industry with the Finance Ministry.
In order to ensure regular supply of funds to Medium and Small Enterprises involved in manufacturing of defence products, SIDBI has decided to earmark an amount of Rs. 500 crore for providing loans.
“A fund of Rs. 50 crore for equity support out of ‘India Opportunities Fund’ managed by its subsidiary, namely, SIDBI Venture Capital Ltd. Would also be created,” it said. (PTI)
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