India’s new defence acquisition procedure (DAP) abolishes offsets in government-to-government and single-vendor deals, enables leasing of military equipment, lays emphasis on framing realistic technical parameters for weapon systems and simplifies cumbersome trial procedures. The new DAP, which comes into force from October 1, seeks to empower the domestic defence industry through the ‘Make in India’ initiative with the eventual aim of turning India into a global manufacturing hub, said Defence Minister Rajnath Singh.
MoD officials, in turn, admitted the 15-year-old offsets policy, under which at least 30% of the total contract value had to be ploughed back into India as re-investments, “loaded extra costs” into contracts while failing to bring critical military technology into the country. Foreign companies are known to increase the contract price by around 8-10% to cater for their offsets commitments, they said.
“So, offsets will not be applicable in government-to-government, IGA (intergovernmental agreement) and ab initio single-vendor deals in the future,” said Director General (Acquisitions) Apurva Chandra. This is significant in light of the latest CAG report, tabled in Parliament last week, which had slammed French firms Dassault Aviation and MBDA for their failure so far to fulfil offsets obligations in offering “high technology” to India under the £5.9 billion Rafale fighter deal inked in September 2016.
The CAG had called for a major overhaul of the entire offsets policy, stressing that it had “scarcely met the objectives” of inducting advanced technology, attracting FDI and bolstering the domestic defence industrial base. As per the new DAP, offsets will continue in deals that have a multi-vendor competition and bidding. “The offsets guidelines have been revised, wherein preference will be given to manufacture of complete defence products instead of just components in India. Various multipliers have been added to incentivise discharge of offsets,” said Chandra.
The other big takeaway from the new DAP was the introduction of the new provision on leasing, which will allow the armed forces to quickly hire transport planes, mid-air refuelling aircraft, helicopters, simulators and the like for urgent operational requirements without huge initial costs and paying for their upkeep.
The DAP also provides for single-stage accord of AoN (acceptance of necessity) in all cases up to £50 million to cut delays.
