NRWS
Speaking at a seminar, Minister of Defence A.K. Antony said that the revised Defence Procurement Procedure (DPP) would come into force from April 2013. Terming India’s DPP as “dynamic”, Antony said that efforts were made to bring “accountability and transparency” in the revised DPP and emphasis was on technology transfer to boost indigenisation. Antony added that the government was trying to meet the objectives of the defence forces for acquiring world-class armaments and expanding the Indian defence industry. The country’s defence sector is open to Indian private sector for 100 per cent participation. Foreign direct investment is permissible up to 26 per cent. He said the government has been keen on encouraging the industry to realign its business processes for strategic alliances and joint ventures.

VIEWS
In response to a report by a Group of Ministers on the reforms required in the national security system, the government formalised the modus operandi of procurement of military hardware through the issue on December 30, 2002, of a document entitled Defence Procurement Procedure 2002. Essentially focused on “Buy” i.e. purchase of defence equipment only from foreign sources, the document was modified in June the following year to read: “Buy and Make” and also to include transfer of technology (TOT). The new document provided the requisite framework for enhanced participation of the Indian indigenous industry in the defence sector as also to assist in closing the generational gap with that available in the developed world.

Based on the experience gained in transactions during the initial years after the formalisation of the procurement procedure, feedback from involved agencies as also to introduce higher levels of transparency and accountability, DPP 2002 as refined in 2003, was once again subjected to a comprehensive review and was replaced by a fresh document entitled DPP 2005.

Between 2008 and 2011, the DPP was amended practically every year and sometimes several times in a year. Currently in force, the 262-page document, the DPP 2011, has been effective since January 2011 and had a validity of two years, a period in which several big-ticket purchases were expected to be finalised. One major change has been to expand the list of eligible segments in which offset obligations could be discharged by foreign vendors. The new areas included were in the domain of internal security and civil aerospace. This was certainly a positive development as the Indian indigenous aerospace industry just did not have the capacity to absorb the staggering volumes of offset business generated by the huge deals in the pipeline.

Despite the refinements, however, there were a number of deficiencies inherent in DPP 2011. Responsibility and accountability continued to remain somewhat diffused between the Ministry of Defence and the concerned service headquarters. Though recommended by the Comptroller and Auditor General of India as early as in 2007, the system lacked “an integrated defence acquisition organisation incorporating under one head, all the functional elements and specialisations involved in defence acquisition.”

Commenting on the refinements, the Minister of Defence had this to say: “The changes in the new DPP are aimed at expediting decision-making, simplification of connatural and financial provisions and also to establish a level playing field for the Indian defence industry, both public sector and private sector.” However, midway through its life cycle, a revised Defence Offset Guidelines (DOG) was added as an adjunct to the DPP which came into effect from August 1, 2012. Quite ironically, the new offset guidelines are far from perfect as these suffer from a number of limitations and infirmities and do not go far enough or are not completely in tune with the key objectives they are intended to help the indigenous industry to achieve.