- To enhance procurement from domestic industry, it is incumbent that procurement is doubled from the current Rs 70,000 crore to Rs 1,40,000 crore by 2025.
- The focus areas will be on procurement reforms, indigenization and support to MSMEs/Startups, optimize resource allocation, investment promotion among others
Ministry of Defence (MoD) has formulated a draft Defence Production and Export Promotion Policy 2020 (DPEPP 2020). It aims to make India among the leading countries of the world in the defence sector, including aerospace and naval shipbuilding sectors.
The document said, “The present ‘Defence Production & Export Promotion Policy (DPEPP) 2020’ is positioned as Ministry of Defence’s overarching guiding document to provide a focused, structured and significant thrust to defence production capabilities of the country for self-reliance and exports.”
The policy has the goal of achieving a turnover of Rs 1,75,000 Crores ($ 25billion) including export of Rs 35,000 Crore ($5 billion) in Aerospace and Defence goods and services by 2025. It aims to develop a dynamic, robust and competitive Defence industry, including aerospace and naval shipbuilding industry to cater to the needs of Armed forces with quality products.
Promote export of defence products
The share of domestic procurement in overall Defence procurement is about 60 per cent. To enhance procurement from domestic industry, it is incumbent that procurement is doubled from the current Rs 70,000 crore to Rs 1,40,000 crore by 2025.
It wants to reduce dependence on imports and take forward “Make in India” initiatives through domestic design and development. It also wants to promote export of defence products and become part of the global defence value chains and create an environment that encourages R&D, rewards innovation creates Indian IP ownership and promotes a robust and self-reliant defence industry.
The focus areas will be on procurement reforms, indigenization and support to MSMEs/Startups, optimize resource allocation, investment promotion, FDI and Ease of Doing Business, innovation and R&D, DPSUs and OFB, quality assurance and testing infrastructure and Export Promotion.
It said, “Expeditious and streamlined procurement procedures are helpful in the development of Defence Production ecosystem and to impact the flow of investments into the sector as well as the use of technologies already developed by DRDO. Several reforms in the Defence Procurement Procedure for capital procurement have been proposed and are being notified. DPP2020 relies on the emerging dynamism of the Indian industry to build domestic capabilities for designing, developing and manufacturing defence equipment. The revision of the Defence Procurement Manual (DPM) for revenue procurement is also underway. “
In addition to the above, the following strategies are proposed for expanding the domestic defence manufacturing ecosystem.
It added, “A negative list of weapons/platforms would be notified with year-wise timelines for placing an embargo on the import of such items from those dates. This list would be updated periodically, without compromising on the operational requirements of the Services, to allow lead-time to industry to prepare itself for any such procurement which is likely to come up, subsequent to the indicated embargo date. “
Project Management Unit
It also said that defence procurement is a highly specialized activity that requires apriori estimation of the development and production lead times specifications and technologies involved, life cycle costs and maintenance requirements etc. of the platforms, equipment and weapon systems. To make the above assessment, a Project Management Unit (PMU), with representation from the Services, would be set up to support the acquisition process and facilitate the management of the contracts. It will bring in expertise to the process of acquisition and create focus and synergy in building military capabilities
The document stated,” With self- reliance as the motto, the aim is to move away from licensed production to Design, Develop and produce wherein the Nation owns the Design Rights and IP of the systems. With this in view for systems projected in the LTIPP, a Technology Assessment Cell (TAC), with representation from the Services, would be created which would make an assessment of the TRL levels available in the country for all the major systems/ platforms and provide advice for initiation of AONs taking note of the time frames needed for development, trials and induction of systems to avoid immediate procurement requests to the maximum extent. “
The Technology Assessment Cell will also assess the industrial capability for design, development and production including re-engineering for production of various major systems.
These include Armoured Vehicles, Submarines, Fighter Aircraft, Helicopters, Radars with the major industries in the country which could be categorised as– System integrators with Design, Development, production, testing & certification capability and ability to develop and sustain the ecosystem required for the next 25-30 years and System integrators who lack integral design, development and certification capability but have the capability and infrastructure to be development cum production partners of DRDO/ any other domestic development agency and have the ability to sustain the ecosystem so developed for next 25-30 years.
The Technology Assessment Cell (TAC) would carry out the scan of regional and global technological capacities and would also render advice to the Services while formulating SQRs.
It stated, ” Procurement of indigenously developed products/systems involves conducting a number of tests and trials and consumes a considerable amount of time as a result of which placement of orders is delayed and industry finds it difficult to carry out advance production planning. A comprehensive review and overhaul of the trials and testing procedures would be done to reduce the procurement cycle time.”
Indigenise the imported components
As per the document, India’s armed forces have over the years acquired a range of platforms from diverse sources leading to a buildup of spares and consumables which has resulted in sub-optimal planning and resource allocation. There will be efforts to adopt a family of weapons approach to standardize and optimize inventory and supply chain management. All Acceptances of Necessity (AoNs) involving procurement from domestic sources would be reviewed for time-bound procurement.
“Efforts would be made to provide the industry greater visibility into the likely opportunities in the defence sector. Understanding future capital acquisition priorities will enable industry to develop technologies, carry out necessary groundwork and position themselves in an optimal manner to compete at the appropriate time. The process of obtaining AONs should be initiated by the SHQs taking note of the lead times needed for development and production indicating the overall quantities required ” as per the document.
The indigenization policy laid out by the department aims to create an industry ecosystem to indigenize the imported components (including alloys and special materials) and sub-assemblies for defence equipment and platform manufactured in India. In total, 5,000 such items are proposed to be indigenized by 2025.
The strategies proposed include an indigenization portal will be developed for DPSUs/OFB/Services with an industry interface to provide development support to MSMEs/Startups/Industry for import substitution. The Make-II process will be further strengthened and monitored to make it easier for the industry to provide indigenous solutions. Inter-Governmental processes would be taken forward to indigenize spares and components for legacy platforms and equipment. Public Procurement Order will be made applicable for procurement preference to those items in defence sector for which domestic production capability exists.
Defence Investor Cell in Department of Defence Production
It added, “The current provisions to enable Startups and MSMEs to participate in the procurement process would continue to be reviewed and further strengthened. “
It also said,” Defence Investor Cell in Department of Defence Production will provide handholding to MSMEs, investors and vendors in defence production for resolving issues with Central, State and other authorities. Vendor Development would be taken up by OFB/ DPSUs and use of TReDS platform would be mandated for improving their liquidity and timely payments.”
For critical products and materials currently being imported, DPSUs/OFB would consider issuing long term orders as feasible to incentivize the domestic industry. It will also have provision for a repeat order. In such cases, the resultant single vendor should also be acceptable with due price discovery and negotiations. Services will hand-hold the industry through continuous interactions, sharing of information and arranging visits to repair establishments/field depots for better understanding/appreciation of the requirements.