Draft DPP 2020 Sees An Increase of 10% in Local Content Requirement
MoD, in the draft has proposed a new category of procurement which is called Leasing
The Ministry of Defence (MoD) has released the draft Defence Procurement Procedure – 2020 (DPP 2020) increasing the indigenous content (IC) requirements across all the procurement categories by about 10 per cent as compared to DPP 2016.
The MoD has sought comments from the industry and public by 17 April 2020. DPP 2020 is proposed to be in force until 31 March 2025.
The draft was released by Defence Minister Rajnath Singh on 20 March 2020.
When notified, it will be applicable to all RfPs that will be issued after the DPP 2020’s effective date, despite Acceptance of Necessity (AoN) having been accorded under older DPPs.
The draft has proposed four new categories of procurement – ‘Leasing’, ‘Design and Development (D&D), Strategic Partnership Model (SPM), and ‘Buy (Global – Manufacture in India)’.
Chapter VII of DPP 2016 on ‘Strategic Partnership Model’ is not included in the draft DPP as no changes are being recommended to the existing chapter.
The concept of leasing military equipment is likely to reduce the financial burden for budget-constrained defence capital procurements. “It would also facilitate a shorter procurement cycle and induction of advanced technologies in minimal lead time. Inclusion of Design and Development (D&D), Strategic Partnership Model (SPM) and Buy (Global – Manufacture in India) categories of procurement is welcome step toward boosting ‘Make in India’ and indigenization,” the statement from PwC read.
Changes in offset guidelines have been a mixed bag. A few changes such as 0.5 multiplier for direct purchase of component of eligible products, deletion offset banking, removal of civil aerospace as well as coastal security products and all services from the list of items eligible for offsets are below par.
Nevertheless, many provisions have been included to encourage both the domestic industry as well as foreign defence companies to ‘Make in India’ in the defence sector. Allowing offset discharge by entities other than prime vendor/ Tier-1 sub-vendor, introducing provision of a third-party valuation from recognised/certified valuation firms for offset discharge through ToT, and allowing offset multipliers up to 4 are welcome steps.